My Stock's Prices Are Dropping, What Can I Do?

So, you are upset. You listened to what I wrote in a previous article, Rules of the Game. You went out and using an application purchased stock in a well established company with which you are familiar and the price keeps dropping. You wonder as you are panicking, if you should sell or hold? I'm sure love ones and associates are all telling you to sell before you lose all of your money.

This happens. Every stock has ups and downs. Sometimes it is because of mistakes the company made which results in a recall causing speculators to panic and dump their shares. Sometimes it is because the company has been hit with a major lawsuit or has been heavily fined. Or investors just don't feel confident with the decisions of the company's executives or the direction they are taking the firm.

I have even seen shareholders panic because the price went down when the company decided to do a two for one split. When I was a manager my office was filled with employees panicking about their Employee Stock Ownership Program shares going from about $50 a share to about $25 because of a split. After taking the time to explain what had happened and how it affected them their anxiety did not go away but they did calm down quite a bit. Anxiety melted down as they began to see that the overall value of their holdings didn't change much and that they had stock which had been trading at $50 a share now trading at $25 a share but they had twice as many shares.

All of these things and so much more can affect investors' confidence in the company's ability to earn and give returns in the future. And all of this and so much more can affect a company very negatively. However, you must remember there are trends and cycles and negative events which will affect a company but the single biggest reason a company has lasted as long as it has and is well established is because it has had the ability in the past to face up to the challenge and weather these storms.

It is only through challenges that an individual or a company has the opportunity to learn and evolve. One thing I like to point out to people is that when the Great Depression struck there were a lot of businesses which went under and didn't make it. At the same time there were far more businesses which did make it through. I also like to point out that savvy investors with the guts had an opportunity to and did make a lot of money during the depression as well as all the economic downturns which have occurred.

I have many examples to use to explain how it works but luckily for me as I started writing this one of my stocks took a nose dive and I was able to keep accurate records on it to explain play by play what I did.

On 11 May 2024 I started up my investment app. I decided to get back into it because my significant other lost her fear of what I have done over and over. Her exact words were, "Go for it." So I did. It was also an opportunity to pass these secrets on to the grandkids who are coming of age. I chose to invest $25 into Ford (F). The price was $12.26 and I purchased 2.03948 shares. The following week I did not invest in Ford because the price had risen and another stock I had been investing in had dropped in price.

On 24 May 24, I invested another $25 into Ford which was trading at $12.18--it was the stock I was following which had the largest decrease in value the rest were actually up. This purchase gave me 2.0528000 shares. It also had reduced my average cost slightly. I had invested a total of $50 and had 4.09228 shares which gave me an average cost of $12.22 per share which was down from the $12.26 average cost per share from the previous purchase. The value of my holding are $49.84 which is a loss of $.16.

I should mention that numbers may be off a little due to rounding.

When 31 May 2024 rolled around Ford was still the stock I had which had the largest decrease so I put my scheduled $25 into it. I received an additional 2.11416 shares which resulted in an average cost of $12.08 per share. The current price of this transaction was $11.83.

I should point out that as the price decreases I am able to obtain slightly more shares than the previous transaction. This helps to decrease my average cost per share and moves that cost ever closer to the actual trading price.

For most of the month of July the price stabilized and I had other stocks which were recording even greater losses. I was taking advantage of those shares. This advantage I am talking about is of course being able to purchase shares at lower prices and accumulating even more shares with each purchase at the lower prices.

For example if a stock costs $50 a share and I purchase $100 worth I will get 2 shares at an average cost of $50. If the price drops to $25 (Which I have had happened and turned those around as well following this method) for my next investment of $100 I will buy 4 shares for a total of 6 shares. Dividing these shares into the total of $200 I had invested it gives me an average cost of $33.33 a share. This is $16.67 down from the cost of my initial investment or a 33.34% decrease in cost. This is because as the price drops I am able to purchase ever more shares with the same investment amount. In our case the first investment was 2 shares and now I have four more because I invested the same amount when the price was down. This has a strong pulling effect on the average cost. Now let's get back to the example.

On 26 July the price had dropped to $11.27. I decided to increase the amount I was investing to take advantage of these low prices. Taking advantage scored me another 4.43668 shares for a total of 10.64312 shares at an average cost of $11.74.

On the 2nd of August 2024 I invested another $50 at $10.31 a share. This increased my holdings by 4.85201 shares giving me 15.49513 shares at an average cost of $11.29.

Wanting to take more of an advantage of these lower prices as the stock nears its 52 Week Low I had an extra $100 on 5 August 2024 and purchased 10.13264 shares at $9.87 a share. This brought my total holdings to 25.62777 shares at an average cost of $10.73 per share.

With another $100 I had from the sell of a stock which was up I bought 10.04198 shares at $9.96 a share. I now had 35.66975 shares at an average cost to me of $10.51 per share.

On 9 August I saw that the price had increased to $10.05 per share. Sensing that the stock might have bottomed out and investors were regaining their confidence in shares of Ford I decided to take another $100 I had and buy an additional 9.95124 shares.

If the price had surged to above my average cost I probably wouldn't have invested it in Ford but another stock which was down. However, since the price was still down against my average cost I invested it to get more shares and reduce my cost per share further. I ended up with a total of 45.62099 shares at an average cost of $10.41 per share.

12 August 2024 Ford stock had dropped to $9.94. Again, I took another $100 I had and bought an additional 10.06087 shares for a total of 55.68186 shares at an average cost of $10.33 per share.

I am currently holding on Ford as the price has gone up to $11.27 per share. I am investing my scheduled investments in other stock which have large decreases.

With my Ford shares I have now a potential gain of $52.53 or 9.14% if I were to sell my shares. I managed to acquire more shares at lower prices and have decreased my overall cost per share. I haven't sold because I believe my stock has the potential to get back up to $14 a share which is were it was before it started to drop.

If for some reason I am wrong in my expectation doesn't work out and the price drops again, then I will continue to reduce my cost and pick up more shares at the bargain basement price. If it increases I will just sell when I think it has reached its limit. Even if it goes higher than my expectation I'll be happy with the return I do get.

I should point out to anyone who reads this and is thinking of investing I had several options when the price dropped. I could have panicked and sold at an 8 cent loss per share but recouped the bulk of my money. I could have done nothing and just waited to see what would happen. Even though the price has rebounded--it is actually up 0.68% for the year I would still be down on my investment by 99 cents per share.

But because I did what I had. I acquired far more shares. I reduced my cost per share significantly. Even though I am still 99 cents below the original price per share I started at, I have a potential gain of 9.14% if I were to sell.

That's life in a nutshell--you can either do nothing and allow things to happen to you or you can take charge of the situation and create potential.

Best wishes and good hunting.