What to do when a stock you own is down 60%?

In July of 2021, I bought shares of an education company that fell roughly 70% in a day after some strict government regulation forced these types of companies to turn the majority of their business segment into a non-profit.

For the educational companies like these, it was devastating and for me as a shareholder, I had good reason to be worried!

However, at a time like this, I had to try not to be emotional and to use logic.

One thing that really put my mind at ease was that I had researched and analyzed the company before buying. I was confident in the company and its fundamentals.

This put my mind at ease.

Then when the price down, I reanalyzed the company to make sure it was still worth buying, and I bought more shares.

Wouldn’t you know, the stock fell further!

I guess it’s Murphy’s Law!

Knowing that the company was still a good value, I bought more.

Warren Buffett has a saying for moments like these:

“Be Fearful When Others Are Greedy and Greedy When Others Are Fearful.”

I was doing as Mr. Buffett said, but you wouldn’t believe the guts it takes to think rationally and do this in real life when you see a stock that you own tanking!

Anyways, now I sit, waiting patiently for the stock price to go back up.

Surprisingly, I’m not nervous, I’m at peace even though my holding in this stock is down about 60%.

Anyone who has invested for any worthwhile length of time has been in this situation. You buy a stock and it goes down…sometimes a lot!

But the good news is that if you originally did your homework, researched the company, and know that you bought a good company at a bargain price, then you don’t have much to worry about.

Another thing to remember is that the stock’s price doesn’t mean much. Price and value can be very different.

One day a stock can be ridiculously overpriced or underpriced. It’s up to you to know the value of the stock and to buy when the price is less than the value.

This way you don’t have to worry if the price temporarily drops because you know that you bought at a good price. Now, you just have to wait until the stock climbs back up to its real value. Then when the price goes past its real value and over what you paid for it, then you can sell and make your profit if you like.

It seems like a simple plan, but in real life it’s hard to execute on the spot.

So my suggestion is to make a decision before you have to make a decision. Make a rational decision to buy at a certain price and sell at a certain price before you’re faced with a situation. Be proactive, not reactive.

Do the work prior to buying a stock.

Only invest the amount of money that you are able to lose and that you do not need anytime in the near future.

This way, even if the stock falls, you will be able to wait patiently.

Remember that even though the stock price drops, you haven’t actually lost or gained money until you sell.

Before buying, know that it’s a good company and be confident in it.

Buy it at a bargain price or don’t buy it at all.

If you don’t know how to tell if it’s a good company or if it’s selling at a bargain price, then use the BTMA Stock Analyzer. It’s a fast way to get an idea of which stocks you should consider investing in.

Or feel free to email me and I can help you.

I hope this info is helpful for beginners and experienced investors to feel more at peace when investing.

Thanks for taking the time to read my message.
-Grant Gigliotti
Grant (at) BeatTheMarketAnalyzer.com