It is an unchanging fact that the stock market is volatile – and individual stocks even more so. Stocks can quickly lose value over short periods of time, sometimes by double-digit percentages. Should you sell when this happens or buy more? In this segment of “The 5” on Motley Fool Live which was broadcast seven. 30, Fool.com contributors Brian Withers and Nicholas Rossolillo discuss how to approach this situation and why it’s important to keep adding money and stocks to your portfolio.
Brian Withers: “Can you please share your thoughts and Skillz (NYSE: SKLZ). I’m down over 60 percent, but after Motley Fool recommended seven percent of my wallet. “We talked about that a little bit yesterday. If the fools make a recommendation and say they go out and say,” We are selling this stock, “they still have confidence in the company and they still take it as a recommendation. I am very curious about the calculations here and we cannot give personal advice. This is now seven percent of your wallet, was it like 15 percent of your wallet before when you bought it? I’m a little worried that a company has become so big in your wallet so quickly. JD, I hope you are putting some money into your wallet. money set aside every day for every paycheck to add to the market and if you do that one way to reduce your skill exposure is to use other stocks that you trust. ient a smaller portion and maybe the volatility doesn’t bother like mu ch. Nick, do you have anything to add?
Nicolas Rossolillo: Yes. Ditto for your two comments on these two companies. I think to add that it is sometimes difficult to detach from the company itself and what it does in the course of the stock. Sometimes there can be very long periods of time where the two are completely uncorrelated. I had heard from a number of those who had done this this year. They just grew too fast last year in the first year of the pandemic and everyone was online and doing everything exclusively online than this year. They’re still growing up, but it’s like, “Oh man, they don’t double year after year anymore.”
Detach yourself from the course of the action, just watch the business. While nothing has really fundamentally changed if you still love the business itself, the same reason you did when you first bought it, that doesn’t necessarily mean you should add more. Brian, where you said keep adding to your portfolio and diversifying other stocks, that’s really important. But you don’t necessarily need to panic either because the stock price has underperformed for, say a year, that’s still a short period in the grand scheme of things. Don’t let stock price performance over a year or less dictate your decisions.
Withers: Yes. Also make a pitch. Nick, you mentioned what your original thesis is, and sometimes these things are actually good to write. Whether in a Google Doc or in a small notebook. You would be surprised. It’s good to go back and review what attracted you to the business in the first place. Then it is very easy to compare; do they still do these things? If you don’t write them down, it still is, I can’t remember what I ate for lunch yesterday. After owning the stock for a year, do you really know the reasons why you bought it? Unless you capture them somehow.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are motley! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.