I’ve bought a stock at Rs 200. Right now, it’s trading at Rs 160. What should I do next?

Sit back and relax. Patience is the key to successful investing. Most stocks won’t start moving upwards from the very next day since you bought it. It’s perfectly okay to see some dip in the stock price. Do not get emotional and give your stock time to perform. Getting emotional leads to poor investment decisions.

Anyways, in such cases- there are two important steps that you need to take next:

 

  1. Validate your investment study
  2. Make adjustment to your strategy.

First of all, try to validate the original thesis based on which you bought the stock. Read the current news and find out the reason why the stock is down. If the news is temporary or the stock is down just because of public psychology (people are fearful), then ignore the short-term fluctuations. Moreover, if your initial study is still standing strong, then consider buying more stocks. After all, you are getting that stock at a better-discounted price now.

On the other hand, if you find that your study was wrong or there is some new news that might affect the long-term performance of that stock (for example- new trade rule, change in government policy, change in management, demerger etc) then exit the stock. Reinvest that money in a better and stronger company.

Besides, your wealth creation strategy also governs your next steps. Here, you need to confirm whether your investment was with regard to capital appreciation or was it a dividend stock. If you bought the stock for capital appreciation, then you might need to do a thorough study and adjust your strategy. However, if it was a dividend stock and giving good dividends year-after-year, then price appreciation is not an issue for such stock. For a good dividend stock, a little price dip is not a good reason to sell. Unhealthy dividends are the reason to exit a dividend stock.

 

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