Will the price ever go up again? There is no guarantee that the price of the stock you own will ever go up. It may be $5 today, but never reach $5 again in the future. Maybe the company lost a patent dispute with another company or had a bad sales year, or had management convicted of a crime, or couldn't pay its bills and filed bankruptcy, or simply had a bad business idea that never took off. The price of the stock could go to zero and never increase.
The price of a stock is based on what the investors think a company is worth. A company doing well with lots of potential for future growth and profits will have a high or increasing stock price. A company in bad shape will have a declining stock price.
Depending on the company/situation, you could wait out a big decline in a stock price and hope that it will go back up, but that's entirely dependent on the situation with that company. The time it takes for that to occur is also unknown, so if you need your money now and can't wait 1, 5 10 or 20 years for the price to go back up to where it was before, then you'll have to sell at a loss.
When investors manage their portfolios, they need to take into account the fact that waiting for a stock to increase may not be the best place to keep their money tied up. It may be more profitable for them to sell the stock at a loss and put that money into other investments that would increase in value faster than if they just left it where it was.
Holy cow. You are missing something. Let's say you bought Research in Motion (now Blackberry) for $110 in 2008. It now stands at $7.60 per share. It is never, ever going to see $10 again, let alone $110. If you "wait for the price to start rising again" you will wait a long, long time because it is never happening. Stocks are not a one-way ticket up. There are hundreds of examples of stocks that have fallen and can't get up.
Also, let's say you want to exercise your silly theory with Apple because you were one of the unlucky ones who bought it at $700 on 9/21/12. But you held it because you think every stock will "go back up." It is now 20 months, over 1-1/2 years later, and Apple is still only back up to $633. In the meantime, your money has been sitting on the crapper with Apple while you missed the boat on Netflix, Priceline and other stocks that have skyrocketed. You would have missed out on a double with Priceline. That's called "opportunity cost" which if you read a book about investing instead of pondering harebrained theories yourself, you would understand.
You are missing the fact that you were luffed into the share at a ridiculously overvalued price (maybe from a newspaper tip or something).If the shrae price doubles form here (no mean feat) it would still only be $2.
They should have been sold ages ago when the writing was on the wall
Although you haven't actually lost money until you sell it the fact remains that you have an asset which is worth a lot less than you paid for it. You have therefore effectively lost the $4 per share.
Are you ok holding that while it stays at $1 for 10 years while the rest of the market rallies higher?
I'm a little confused as to how losing money when stock prices drop works. Say if I buy 1000 shares in a company for $5 each. Then overtime, the stock price drops to $1 each. At this point, if I were to sell my shares, I would obviously be at a loss. However, couldn't I simply hold on to my shares and wait for the price to start rising again? If you do that, then there's almost no way to lose money?
I feel like I'm missing something here and don't understand the big picture. Can anyone help?
