GameStop’s stock crash burns you? 5 ways to get back on track

GameStop stock late in January all the fury became after the shares of the video game trader with more than 1 400%a high of $ 483 apiece on January 28th. Merchants on Reddit spurred the leap into GameStop and other companies, such as AMC BlackBerry and Koss, and these shares became known as’meme shares“because of their ties to the online investment community and their extraordinary volatility. But as fast as these stocks shot up, they crashed, leaves many people in the red.

More people are investing thanks to programs without commission, such as Robin Hood and Webull, but there are risks if you play the stock market. There are some who have profited from the GameStop roller coaster, while others lost more than they expected. That money may be gone now, but with a better investment strategy it can return.

Since the beginning of February, GameStop and other meme shares have only gone downhill, with the exception of the recent bump. Instead of liquidating your entire portfolio and just getting it as a loss, it is possible to turn the negative into a positive by following a few simple steps.

Do not chase after your losses

Just like in gambling, there is an urge to recover your lost money quickly. In the case of investing, it can mean that you bring in more money, or even loans, to make one or two big moves that you hope will be positive again. This can be dangerous.

“If you think an investment is worth it, and you have the venture capital, you should do it,” said John Payne, senior futures and options broker at Daniels Trading in Chicago. “However, never do it for the sole reason of recovering what you lost in a previous trade. Every market decision must be independent of the previous one.”

Even though you’ve lost a lot of money quickly, you can take some time to get your portfolio back on track – and that’s OK. It can take months for you to recover, but if you chase after the money that’s gone, you could end up in a deeper hole.

Resist investments FOMO

Professionals recommend that you try to separate emotions and impulses from investment decisions. The fear of missing out, or FOMO, is hard to resist, but it can be costly if you give in to it.

“A lot of people have seen these stocks go up, and also seen how much money is being made on their social media, and that’s why they jumped in,” Payne said. “I think a lot of people will talk about how much money they earned while others left the losses.”

Experts suggest making decisions based on the data you have. Find out where you put your money and why. Although the example of GameStop flies with this, fundamental and financial factors are usually important to the value of a stock. Don’t throw money at a stock just because it tends to be on Twitter.

Segment your portfolio

Diversifying your stocks is one thing that makes professionals the key to the profits in your portfolio. Placing everything in GameStop, or any business for that matter, is a dangerous risk.

“Instead of looking at your entire investment account as a ‘big’ cake, segment it into two or three slices,” said Farron Daugs, CEO and founder of Harrison Wallace Financial Group.

Daugs says he has one piece of your portfolio dedicated to long-term investments that you want to stick to for years. Another part should be for stocks that are slightly shorter, such as a year. If you can then have a third share, with money you use to play with stocks that are doing well in the short term, such as a few months or weeks.

Understand why a stock is ‘in the game’ and moving fast

The stock market can be confusing, but changes usually occur for a reason (although this may not be so obvious at the time). A sudden rise in a company’s share price may be linked to a bit of news that has caught investors’ attention. Learning about the pieces of data is important to be positive again.

“If you have a good understanding of why a stock is moving, you will also have a better idea of ​​the risks associated with buying the stock,” Daugs said.

GameStop’s turnout was not typical. It was unprecedented and something you could not predict just by looking at the data. In his testimony before the House Financial Services Committee, Robin Ten chief executive Vlad Tenev said the stock’s performance was being referred to by analysts as a five-standard deviation, or five sigma, and that it had a 1 in 3 chance. 5 million has to happen. The company as a whole did not perform fundamentally well, putting between $ 15 and $ 20 a share in early January. When the stocks swelled, people jumped on without knowing that a confusing game by some hedge funds was the catalyst. Some people did not see that it would be a very short ride with the roller coaster.

“These stocks usually do not move because they have suddenly improved their businesses and are expected to be more profitable,” Daugs said. “These are trains that can jump off the rails quickly. You do not want to be the last one, because eventually stocks will return to their ‘real valuations’.”

Do not be too greedy

There are no guarantees in the stock market. The fall of the meme stock includes that point perfectly. There simply comes a time when you need to show discipline and avoid greed.

“Be disciplined and have a sales strategy,” Daugs said. “Keep a price in mind for the potential ups and downs of your stock.”

If you are in a situation where you are growing up, you should always apply the brakes when it looks like it is going south. Nothing is earned by holding a stock that is trending downwards longer than everyone else.