kind of a new invester but didnt know if it's a good thing to basically chase your stocks that are falling a bit to lower your cost basis. 2 of the stocks i am referring to are CARB and RIMM. my cost basis was a little high then the stock dropped even more and dont know if i should "chase it down"??
Let me suggest you are at least asking the wrong question and perhaps looking at saving ego as opposed to investing.Consider these #1 Anybody who says they have not made stupid mistakes investing, is lying, blind of too inexperienced to listen to.#2 Being concerned about an investment basis might make for the wealthy, is something accounts like to talk about, and probably of less importance than #3#3 One should never purchase stocks without a firm basis to expect an adequate return at the purchase price. Just because you thought XYZ as a good deal at $50 is no reason to buy more at $25. Rather spend time figuring out what you did not know when you made the $50 purchase. Maybe the majority of current owners are still buying at $25 and the stock is really only worth $12.50Regarding RIMM -- I get the feeling it has dropped in price since you bought it -- so what makes you think you know more about that company today than you knew when you first bought? Do you think you know more about the chances for survival than the Wall Street people who work full time and spend tens of thousands on research?GordonAtlanta
Most people tell you that doubling down is a bad idea. If the stock has declined by your loss limit (usually 10 to 15%), you are better off to admit that your timing was wrong on this stock and sell. Then buy something with better prospects.Value investors who buy stocks that they think are undervalued, have a different situation. If it was a good buy before, its a better buy now. But if the price is going down, how low will it go?Growth investors will sometimes double down but only after careful thought about it.If it was supposed to go up and didn't usually you want to sell. But did you give it enough time? When will earnings be reported next? Will they be good?Usually holding losers is a mistake. Sell and buy something better.
The main question to answer, why did you buy the stock in the first place? Are those reasons still valid? If yes, and the price has dropped, why not buy more? If no, either sell or hold.JLC
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