What Can You Do If You’ve Lost a Lot of Money in The Stock Market?

One mantra that is echoing these days is: “you haven’t lost money until you’ve sold your stocks”. There is some truth to that saying, so if you’re holding stocks right now that are showing a loss of 50, 70 or 90% this is what you can do to take stock of the situation, regain some faith in your ability to make decisions, and decide on your next step.

Don’t sell a wonderful business (but you might want to sell a bad businesses)

Some businesses are of high quality – we call those "wonderful businesses". They have great leadership and a competitive advantage. Some businesses are sickly, they are not profitable and/or have a lot of long-term debt.
Review the companies that you hold in your stock portfolio by using my checklist – are they healthy or are they sickly. If you don’t know how to use a checklist, watch this free webinar. It's not too late to find out if it’s trash or treasure you hold, and you can make a sound decision based on your new knowledge. Don't trade with your emotions  - make knowledge-based decisions

If you own shares in a quality company – hang on tight. You might even want to buy more and reduce your stock price.
According to Warren Buffett you should be prepared for holding stocks for a very long period and you must be prepared for stocks to go down 50% or more.

That is why it’s critical that you buy quality. A common mistake that people make is to think that the crisis will never end. The other mistake is that people think it will end quickly - it could take decades.

If you find out you bought a sickly business, a business that’s not well run, it’s now time to evaluate if you should sell with a loss or hold on and hope or pray that the stock will bounce back. It’s only you who can determine if you should sell and take a loss right now.
But don’t buy more - don't add to a losing position in a sickly business! The risk is that you're growing your loss.
Some independent investors never find out that they’re holding a sickly business and they continuously “buy the dip”. But the dip never ends. Not all stocks will recover after a deep market decline, for some it will take many years until they do. Read this article with examples.

Don’t be that person who reads this article but don’t act in fear of the truth. If you’re unsure of the state of the company you own shares in, go through the checklist now. 

Learn from your experiences. You learn by reflecting and writing your learnings down. And then you must get back up on the horse– investing in the stock market is the key to growing your wealth.

Determine your investing strategy

Because the key to building wealth is through investing it’s never too late to choose a strategy. It’s like riding a bike, you need to get back up until you find out what works. There are a ton of investing strategies out there from tracking floors and ceilings, entering and exiting on technical indicators and what not. From momentum trading to long-term investing – you need to choose a strategy that fits your temperament. On this blog you find the investing strategy from the most successful investor of all times: Warren Buffett. 

Taking a course and learning from someone who has already studied and implemented investing strategies will catapult your learnings. Unlike watching videos and reading books you’ll have someone who can hold you accountable so you can progress. 

Putting education on hold is not a good idea. You might think: this is another thing on my plate right now and I can’t cope. But right now is the right time. Don’t waste a good crisis on being numb. A crisis provides a perfect opportunity to begin a change that you’ve wanted to make (and Warren Buffett uses a  crisis in the stock market to his advantage – I do it and you can learn to do it too). Don’t continue to make the same mistakes. Learn to invest from someone you trust.

Once you’ve determined a strategy: stick with it! Be disciplined. 

Forgive your mistakes

If you’ve already sold your shares, or if you’ve realized that the company you purchased was a sickly business, or you’re just generally in doubt about what you’ve gotten yourself into. Take a breath. If you’ve made a mistake, then forgive yourself. We’ve all been there including Buffett. He has made very costly mistakes in the past. I have too. I’ve made mistakes and learned from them, and I will likely make mistakes in the future. I’ve bought and held on to sickly businesses, I’ve panic sold wonderful companies and I’ve jumped into businesses I didn’t understand. I write it down, reflect on learnings and keep a journal with notes that I can revisit.  

I’ve tried multiple different strategies until I found this strategy that I’m super passionate about and I know it works. 

I have also found that it helps me to think about what I can influence and push things aside that’s out of my control. The current market conditions are out of your circle of control – you can’t impact the stock market, but you can impact your own actions (or lack of action). 

If you find yourself numb and incapable of acting, here’s a tip for a quick state change that I use. What is positive in your life and what can you be grateful for? Take a 5-minute break right now, close your eyes and think of 3 things you’re grateful for or 3 things you’ve accomplished in your life. Do it now – it’s such a tiny action to take today to lift your mood and changing state is a step to getting out of a situation where you feel stuck.