If you purchase a share and its value is always on the decline, is it worthy to dispose (sell) off the share/s and make small money or just have hope that it will someday pick-up in value?

Pls market gurus, let's hear your opinions

??

Sell. Never get emotional with your stock even if a stock is doing well, as long as you have made a little profit from it or the stock has appreciated in value, sell off and move to the next. Word of advise, when it comes to the stock market, no body is a Guru. We will keep learning.

ernie2007: Sell. Never get emotional with your stock even if a stock is doing well, as long as you have made a little profit from it or the stock has appreciated in value, sell off and move to the next. Word of advise, when it comes to the stock market, no body is a Guru. We will keep learning.

Thanks bro! I appreciate

@Ernie2007: I think that's very bad advice. If you sell stocks when they are rising and expensive, and sell when they are falling and cheap, you will always lose money on them. That's basically buying high and selling low.

@val_dubem: buying or selling a stock should not be based on whether its price is rising or falling. It should be based on its true value.

If a stock is falling because the financial results of the company and your analysis indicates that the company is worth less, then you should sell immediately after your analysis leads you to that conclusion. Don't wait for the price to decline before selling it.

If a stock is falling because it was overvalued in the past during a stock market bubble, then you should sell immediately once the bubble is popped. Don't wait for the inevitable decline of the stock price before selling. If the stock price has already fallen below the true value of the company, then you should wait until it recovers.

If a stocks price is falling and your analysis suggests that there is no good reason for it to be falling, and that the stock is undervalued as a result of the decline, then you should probably buy more of the shares if you're sure of your analysis.

Determining a stock's true value is necessary before making any decision on whether to buy or sell.

@seun: thanks for ur advice. But the 'big issue about Most Nigerian buyers is that they hardly know when a stock is over-valued.

8yrs ago, I bought a share from one of our financial institution; I later found out it was one of my worst investment decision ever. Not until the company went under, it was geometically declining in value; I had d hope that it 'might one day appreciate, but it never did.

Now my question is: how Do you know if a stock is over-valued, as you cannot always follow ur insticts and atimes ur analysis may fail you.

it is sad that people think stock investing is a gambling. If you buy the right stock, then it should not be declining when the market is stable and if it has to decline, it will be a reaction.
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val_dubem: Now my question is: how Do you know if a stock is over-valued, as you cannot always follow your instincts and at times your analysis may fail you.

The true value of a company is the discounted value of all its cash flows (profits or dividends). It is the amount of money which, if invested today in risk-free long-term securities like 30 year FGN bonds, will earn the same amount of money over time as the company in question, after tax. So before you can value a company, you need to know how much money company is likely to make in the near and distant future. You can figure that out by studying the financial statements of the company carefully. It will tell you what assets are owned by the company, their current and past profitability, etc, which you can then try to project into the future. See www.sec.gov/investor/pubs/begfinstmtguide.htm for more details about how to read financial statements. Financial statements in Nigeria are probably not as reliable as financial statements in the developed world, so you have to read between the lines to figure out whether the management is trying to deceive shareholders or not. If this seems like hard work, then yes, that's exactly what it is. You can't make much money in any venture without working hard.

Once you've determined the true value of any company, you should divide it by the number of shares outstanding to get the true value of each share of the company. If the shares are cheaper than the true value, then they are under-valued. If they are more expensive, then they are over-valued. Due to the fact that your estimate of the value of the company may not be exactly right, you should only buy shares that are significantly cheaper than their true value. For the same reason, you should only sell stocks that are significantly more expensive than their true value. If you need to sell your shares during an emergency, you should sell the most over-valued or least under-valued stocks in your portfolio.

Now my question is: how Do you know if a stock is over-valued, as you cannot always follow ur insticts and atimes ur analysis may fail you.

compare the price earning ratio with its other stock in the same industry,or possibly find the average of the price earning ratio if its below the subsector average then its not over valued,

when a share is on steady decline if the price earning ratio is high then,the decline its a correction but if d price earning ratio is low,hold on to it in no time it will recover

If your stock is going down and you think may not pick soonest, i can sell and buy a more profitable one instead of holding on to it while you lose everything or nobody buys again.

You can determine a stock that is overvalued by calculation the earnings yield,dividend per share,
Bonus history ,Trend Analysis,price comparison with other similar stocks with share capital and profit almost the same.

From my years of experience in stock market and as an accountant,i will suggest you don't just base
your judgement on quantitative factors alone,qualitative factor is a very key element in taking decision.

@Seun my response was to the question, If you purchase a share and its value is always on the decline, is it worthy to dispose (sell) off the share? ALWAYS ON THE DECLINE.

In the stock market anything can happen and a company with good analysis can fail over night by mare factors as change in government policies. Truth be told, financial statements in Nigeria are not reliable and should not be the sole reason for analysing a company. There are companies that will never recover or at least raise above the share price during the IPO. Would you advise someone to hold on to such stocks?

The stock market to me is business, we are in business to make profit, personally if i make profit off a company' share that i own, i sell off, i donot wait or regret anything as the stock market is not and will never be predictable. I am not saying this should be a rule.

I do understand what you are saying and you have a point, but all i did was answer a question based on what has worked for me, the decision to sell or keep is his to make.

Nice comment @penuelway

seun, when will you start sellling shares for nairaland lol>?

val_dubem: If you purchase a share and its value is always on the decline, is it worthy to dispose (sell) off the share/s and make small money or just have hope that it will someday pick-up in value?

Pls market gurus, let's hear your opinions

consult a broker for a professional advice

val_dubem: If you purchase a share and its value is always on the decline, is it worthy to dispose (sell) off the share/s and make small money or just have hope that it will someday pick-up in value?

Pls market gurus, let's hear your opinions

@OP, if I interpret your post literary, it would suggest that you already have a strategy. Otherwise, why would you buy a stock that is always on the decline unless you expect it to bottom out at some point before beginning to rise again? In general, you should have a strategy towards investing depending on whether you are risk adverse or not. The fact that you are investing in stocks would suggest that you do have some tolerance for risk meaning that while you may make money, you should also be ready to lose all your money. That said, if you are doing this with a broker, let the broker do the worrying for you. Otherwise, only invest in what you know; that way, you are well aware of when to exit from a particular stock. In addition, you can better differentiate from the noise, market forces, etc...

Hi guys. I have an issue similar to the poster's. I have acquired some stock for about 6 years now. During the economic meltdown the values of those stocks went very, very low
Now that we all belief the meltdown is over, the stocks refuse to come back to original value. What will you advice me to do to those stocks? Please note that the companies still exist and functioning but their stock values remain very low. Counting on your experience.

Seun has said it all. Stock picking isn't for kids or lazy people, if you are not ready to do your homework as Seun has described then go buy bonds, money market instrument, or mutual fund.

If you are going to give your money to a fund manager then you should be able to properly interview them to know how they make their buying/selling decisions.

Warren Buffet says; buy when people are selling (price dropping) and sell when people are buying (price raising). After serious scrutiny of the company in question sha o! Me i prefer mutual fund, abi na risk-free portfolio mgt dem dey call am.

abifoluwa: seun, when will you start sellling shares for nairaland lol>?

I seconded this question. I think our NL owner should give this a careful thought. Di your homework and hit the Nigerian Stock Exchange. When you do, make me a lion shareholder.

.

Seun: @Ernie2007: I think that's very bad advice. If you sell stocks when they are rising and expensive, and sell when they are falling and cheap, you will always lose money on them. That's basically buying high and selling low.

@val_dubem: buying or selling a stock should not be based on whether its price is rising or falling. It should be based on its true value.

If a stock is falling because the financial results of the company and your analysis indicates that the company is worth less, then you should sell immediately after your analysis leads you to that conclusion. Don't wait for the price to decline before selling it.

If a stock is falling because it was overvalued in the past during a stock market bubble, then you should sell immediately once the bubble is popped. Don't wait for the inevitable decline of the stock price before selling. If the stock price has already fallen below the true value of the company, then you should wait until it recovers.

If a stocks price is falling and your analysis suggests that there is no good reason for it to be falling, that the stock is undervalued as a result of the decline, then you should probably buy more of the shares of you're sure of your analysis.

Determining a stock's true value is necessary before making any decision on whether to buy or sell.

First time Seun is making sense on this forum since he opened it in 2005! Who's handouts have you been reading oh great sage of Ota?
Bros abeg na joke o! No go gimme 6yr ban abeg.

well, to me I have been discouraged to buy Nigerians stock market shares after losing alot in transcorp saga and my cousin and his mum lost almost 5 million naira also in similar circumstances . there're lot of manipulations in the market.
I have trained myself over 7 years now to be a successful forex trader, and for the past 2years I have never looked back on live trading .
I prefare fx trading to buying Nigerians shares,but I respect those who make s money in Nigeria's stock trading regularly especially the blue chips and penny stocks but for me,forex is the money to lose less and if I lose much,I stop trading, I learn from mistakes wait for better opportunities and keep on and make gradual profits,but in stock, it may be very difficult .

babanne:

I seconded this question. I think our NL owner should give this a careful thought. Di your homework and hit the Nigerian Stock Exchange. When you do, make me a lion shareholder.

I believe nairaland isn't yet ripe to hit the stock market. Seun knows what he's doing

My problem with Nigeria coys is dt they have few DURABLE COMPETITIVE ADVANTAGE COMPANIES like Guiness, NB, Nestle, PZ, The rest are just price competitive coys.

Buy a new phone line and start dodging your creditors!

Just jump from a five storey building

val_dubem: If you purchase a share and its value is always on the decline, is it worthy to dispose (sell) off the share/s and make small money or just have hope that it will someday pick-up in value?

Pls market gurus, let's hear your opinions

If its fundamentals are intact, dont sell. If you are a short term investor, take your profits.

Patiently wait for it to rise again. most logical or sell & loss.
lo ba tan

Buy more.

Just leave it and die.