How to Manage a massive loss on the market

Hey PC.

Just wanting to know how everyone manages seeing their Portfolio going massively into the red overnight.

I'm currently in an unfortunately situation, and at a loss what to do.

To put it into context, look at RAP. And you'll understand.

Things happen, it's a good lesson and just move on.

However, right now, not feeling the greatest. I'm stuck to hold or just sell and realise that loss. Any advice or suggestions would be greatly appreciated.

Would love to hear your stories and how you overcame those situations.

Many thanks

 

Ouch. Feel sorry for you. If you exit now, how much in absolute dollars will you come out with? If it's not a very significant amount then can leave it be.

Selling crystallizes losses but also gives you capital losses to offset future profits. If you think it's a dud investment then cut your losses otherwise hang tight and maybe there is some hope of recovery.

 

Wow - that's rough.

That's why not having all your eggs in one basket is important. On the upside, if you wait a couple of days you might find some bargain hunters come in. Or you could lose more, if it keeps going down....

Once it's happened it's a bit late to manage things, however for future, sometimes buy and hold is not ideal - having some stop losses in place can mean the difference between a small loss and a massive one. If you use CFD's you can pay for a guaranteed stop which can give great SANF.

Knowing how to use technical analysis can also help - there's a strong uptrend in the RAP 5 yrs charts, after which would have been a good point to reduce exposure. You just got to know when the trend is over. If you've never looked into TA I'd recommend it.

Combine the two and you've got a level of protection in the markets that a buy and hold forever investor simply doesn't have.

To put it in a property context - with TA and a stop loss, you're an investor who bought in Gladstone, but saw the drop coming and got out, compared to the ones who held forever, and saw their investment drop to a fraction of its high.

 

I'm just shy out of the 1 year holding period. So If sell now, possible to maximise that capital loss. I suppose.

But it does seem like a dud. It is the first day of the drop, possible bounce, or don't other risking it.

God my missus is going to kill me, not to mention, puts my ideas for a second IP on hold.

Yeah, haven't actually looked much into TA, it was a silly amount of investment to begin with, but the capital growth was great, just didn't know when to leave.

 

Sorry to hear, been there and done that. Bought Allco Finance Group before GFC and braved myself and sold it for a big loss before it went into voluntary administration.

Since then my investment in shares goes something like this.
for Speculative I will only risk my one week pay.
for Mid Cap up to Fortnightly pay.
for Large cap up to a Months pay.

 

I've had a few do that - I've just decided to 'sit, and hold' (and hope that they'll bounce back).

If you don't need to realise the loss right now, can you hold out for a bounce back?

 

Good tip, I'll add that to the drawing board. It's back to square one. Thank you.

Well I don't really what to do. Pretty sure I'll sell out. I'm waiting for it to rise a few pips, but don't think it's worth the risk anyway for a few $$

 

Sorry about your situation.

I'd be thinking about the above statement some more. It doesn't sound like you have learned the lessons you could have here. It wasn't about knowing when to leave - it was about where you went in the first place - you went there and by the sounds of it with your whole portfolio.

This was never an investment, it was a speculation.

This isn't a GFC style crash where quality income producing companies have had their values slashed. IMO this is (was) a "$200m" tech bubble company with zero revenues and a product (an app from a very brief read) that maybe completely useless and sounds like a pretty crap idea to me anyway. Can you imagine walking into your doctors office and saying "my phone tells me I've got pneumonia!" your doctor won't be impressed.

Maybe I'm just getting old and this is the future and RAP will have another round of tests and it will come screaming back.

I know what I would be doing.

 

I'm 100% with Hodor on this. Stop losses and technical analysis have no place in this discussion. I believe you made a huge mistake initially and over paid for prospective earnings that haven't come to fruition yet.

What was your initial thesis for putting money into this company?

There is a good summary here - 3 reasons I’m avoiding Resapp Health Ltd at all costs

If it was me personally, I'd cut my losses and move on. I'd spend some money on books to educate myself and avoid making any investments in shares until I was more educated.

Do you know how to read a set of financial statements? Do you understand the difference between accounting profit and cash flow?

I would recommend this book to understand the importance of cash flow to a company - https://www.amazon.com/Outsiders-Unconventional-Radically-Rational-Blueprint/dp/1422162672

 

I mean, it's theoretically possible that you could analyse a cough and somehow pick up the underlying illness. The problem is that clinical exam for resp diseases is so soft anyway that I struggle to believe this will be accurate in any way. For example, you might hear focal crepitations, but you really can't tell if that's due to infection or fluid a lot of the time. You might hear a wheeze, but often you can't tell if that's asthma, COPD or fluid.

Obviously the results of SMARTCOUGH-C haven't yet been properly published, but their interim release is basically enough to write off the technology as a whole. Their whole set of arguments over "wah wah they treated the children before recording and there was background noise" are incredibly stupid. Day to day clinical exam takes place in precisely the same conditions.

They then went through and removed any recording in which they judged the child to have been treated first or they determined to have "background noise" (no details given on whether they did that appropriately or not, but it's an obvious place to manipulate your results). Even after all this manipulation and ideal conditions, they still couldn't get anything approaching the (very low) targets they'd set.

They've tried to show a silver lining with "oh well, there was a signal on bronchiolitis" but A: the signal was tiny and B: bronchiolitis occurs only in a very set age range, is generally very easy to diagnose, management is solely supportive and all decisions in management are based purely on how sick the child is, not on definitive knowledge of the diagnosis.

Even if you accept that this product will perform better on the next trial, what's community uptake going to be? What's their planned pricing model? There won't be hospital uptake of this in the first world and while there may be in the third world as a low cost tool in resource poor areas, that's not something you can really profit from...

 

This is the only technical consideration imo. If you have capital gains coming up that can be offset, sell.

Amazed that a risky stock like RAP was a significant part of OP's portfolio. Either the portfolio is small (chalk this up as a lesson and move on) or OP likes to gamble a significant sum of money (also a lesson.) Next time, diversify!

 

Looks like December 2016 was a good time to get out... "executive director and VP of corporate affairs, Brian Leedman, dumped 6.8 million shares on the market."

I have a chart where the day I purchased shares was its absolute zenith, the only solace I get nowadays is turning the chart upside down

 

@Redwing massive redflag - director drops shares, so do you.
Now if you see a few of them all jumping in to buy some more...

 

Nobody can tell you what to do here, you have taken a large position in a small cap growth stock (the riskiest part of the market) and it has blown up. Its a common story. Stories of how one weathers a market downturn dont fit your position. You'll need to tough it out and make your own call, and hopefully learn something from the experience.

 

As an aside, this is a good book around capital allocation....useful for those managing business too.

 

The end of that chart looks like my emotions when I accidentally knocked over the last full glass of my favourite home brew last night.

 

What book would you suggest as a start for someone wanting to learn about ta?

 

Try Louise Bedfords 'Charting Secrets' - its basic and really easy to read and understand - don't need to be a complete nerd to enjoy it!

I use very simple TA - more can often over complicate things. Happy to chat if you have questions.

 

How many people have accumulated wealth through technical analysis? Who are they?