An article by Sherin Dev
One of the critical investment lesson investors should always keep in mind is to offload any stocks and shares whenever it turned as a bad investment. Such errors commonly occurs to beginners as they would buy stocks of the companies without any proper study or research. Other mind of people found holding such bad investments or stock and shares with a hope of its price would rise again in the future. Both would give negative impact to the portfolio by erasing capital as long as it holds.
Is there any proven strategy to deal with bad investments or stock and shares in hand? Yes. This article give you an idea to deal with such investment and bring your capital back with counter actions.
Solution
If you have number of stocks and shares that turned as a bad investment, better to sell the same at the earliest to collect the remaining capital. Ensure you are not utilizing this fund for any other purpose as this is their to bring back your lost capital through some successful actions. Suppose you have invested $50,000 to number of stocks and it turned bad and now you have only $18,000, better sell the stocks and get the $18,000 to your hand. This should be your first action. Next would be, identifying good stocks that have consistent ROE growth of more than 16% for last 10 years, no debt or debt less than one year net profit, running by ethical management, business leader in the industry in the sense of having a or more products that is monopoly in the market. Prefer cash rich companies especially. This is little tough for an ordinary investor but using commonsense, it is easy to identify such companies in your country. Suppose if you are asking to someone about their favorite soft drink, they would certainly say Coca Cola or Pepsi. This is a method to identify industry leaders. Rest is in your hand.Use your commonsense to the maximum to get these details. Patiently wait to get the stocks of such carefully selected companies in a discounted price. This would generally happens when the stock market down to the maximum due to any macro economical reasons such as recessions, economy downturn, calamities (Japan is the best example for such recent happened downturn) or any other similar issues etc… When the stock prices of your selected company reaches to a fair level to buy, invest your amount ($18,000) to that stocks. Breath easy. You will soon start to realize the wonders. Healthy businesses would easily survive in the market once the issues, that dragged the prices of such companies, solved. This would give you double gains in the form of dividends, higher value to your money as well as good business in hand as a fantastic investment! I can easily say this idea would work well because I have practiced and succeed with this (Of course only once because after that I have never invested in a bad company to sell that investment and try this method again)
Some of the points to remember here is:
– Bad investment should sell at the earliest before it make and big damage. – Time to time monitoring tell you how your investment performing. This would help you to take right decisions in right time. – Always monitoring company and their activity once you have invested into their business/stocks. – When re-investing with in intention to catch your lost money back, selection of the right business/company is critical. – Never play trading with your remaining capital. This would give further lose than any profits. – Never look for parallel investments. Real ability is to work to get the money back from the market itself where where you initially lost the same. – Be courageous. Don’t worry on stock market volatility. Good business never get affected with such temporary situations and investments in good businesses would be thus safe. Any doubts, queries, feel free to ask.
Sherin Dev, a financial writer, investor and the founder Investinternals.com and moneywithmoney.net financial blogs. Follow him on Twitter or in Facebook. Any queries on articles, guest posts, contact at investinternals@gmail.com