When should Investor to Rebalance, Hold or Cut loss When the Market Price Drops

In stock market investment, after buying some shares of a certain company, we need to monitor the financial condition and profitability of the company in order to make a better decision on it. When the market price drops, we got paper loss. However, knowing that the market price is so-volatile in short-term period of time, we should make our mind calm down first. And then, review the condition of the company before making a decision to: Rebalance, Hold, and Cut-loss

My personal strategy:
Rebalance, only if
1. The fundamental of the company is still the same or even better.
2. Cheap sell due to the EQ of "investors".
3. It is already cheap enough.

Hold, only if
1. The fundamental of the company is still the same or even better.
2. The market price drops due to the EQ of "investors".
3. It is still not cheap enough for rebalancing. (Maybe we need to wait for another 20% discount, for example)

Cut loss, only if
1. The fundamental of the company is changed (become worse)
2. It is expected its earning will have negative impact.
For example, some companies unable to transfer its cost to its customer, so the profit margin or the company will reduce. If this condition still remain, at the end of the day,

So, as you can see, the first thing to do is to evaluate the fundamental condition of a company based on your homework and personal experience. That's all for today. More fascinating articles and sharing will be updated from time to time in Xaivier Blog. So, you are welcome to subscribe our feed, look at our sitemap or simply visit our Homepage.

Written by: Xaivier Chia

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