My Stock Is Down 50%

The situation

One company stock you own is down 50%, and the price you paid is making it hard to judge whether the position still deserves a place in your portfolio.

The three-step answer

1. Make the decision from today. Ask whether you would use the position’s current value to buy the same stock now, given your goals, time horizon, and other holdings. Do not use your purchase price or a desire to get back to even as the reason to hold. Use Should you own individual stocks?, Why stock prices move, and Your investment policy statement to make the forward-looking call.
2. Bring concentration back within your plan. If the position is larger or riskier than your policy allows, decide how much to sell and where the proceeds should go before placing the order. Route that choice through Why diversification works, Asset allocation, and Individual stock picking.
3. Check the tax rules before you trade. In a taxable account, review how the loss may affect your taxes and whether a planned replacement purchase could trigger the wash sale rule. Use Tax-loss harvesting, Capital loss carryforwards, and Wash sale rules rather than letting the tax angle decide whether the stock belongs.

Why this order

The tradeoff is that keeping the stock preserves its possible upside, while selling can reduce single-company risk and move the money into a portfolio built around your goals. Decide whether you would own it today before thinking about the old price because the market does not know what you paid.

Set the desired position size before handling taxes so a potential deduction does not turn into the investment thesis. Taxes affect how you execute a good portfolio decision, not whether the original decision was good.

Change the order if this is employer stock subject to a blackout period or another trading restriction. Confirm when you are allowed to trade before placing an order, then carry out the forward-looking decision when permitted. Use Equity compensation for that case and The order of operations for your money for the destination of any proceeds.

Go deeper

• What is a stock?
• Risk and return
• When to change your portfolio
• Capital gains taxes
• Market orders vs. limit orders