When does it make sense to sell stocks at a large loss?

I would hold it. I am thinking about jumping in on SDRL and holding it longterm

You have to re-evaluate it like this: Would you buy SDRL today at the current price? If not, what else would you purchase with your remaining funds instead?

You can't look at it as if it's a loss or it will cloud your thinking and judgement.

When the loss is, effectively sunk cost with little to no prospect of recovery - AND - you can get favorable tax treatment versus waiting to take the loss later - typically before retirement, but let's say you planned to move to another job that has a much lower starting pay, but lots of upward mobility - if you have that situation about to happen - you can take the loss now, to generate maximum benefit.

Another example would be to offset significant capital gains in other stock sales, or real estate for example, within the same tax year.

But, it is definitely something to think about, because, if done correctly, can yield free money.

Reasons to sell a loss position:

1) You don't think there is much of a chance of recovery, due to some problem with the company/market/environment

2) You can take your proceeds and invest them in other instruments that are more likely to outperform the stinker (without messing up diversification)

3) You have sold some gainers and you want to use the loss to shield the gains

4) Same as 3, but you do think the stock will eventually recover, but not in less than 31 days (avoid the wash sale rules)

5) You need the cash out of the stock market.

3, 4, and 5 don't apply to Roth investments. Well, I guess 5 could apply, but that's a whole another set of issues.

With only ~$1400 to lose, I'd hold out on it with such a large time horizon if you don't think they'll go belly up. You already went pretty much all in on the company, I'd let it ride. Then again, I don't know how much $4200 means to you.

I generally sell if something gets below a 5 to 10% loss. One thing for sure is don't buy more if something has gone against you. Just because SDRL was at $43 once does not mean it will certainly make it there again.

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I generally sell if something gets below a 5 to 10% loss. One thing for sure is don't buy more if something has gone against you



Not sure about this strategy

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I use it for higher risk items like futures and individual stocks. For index/mutual funds, etf's with broad exposure I might do a little averaging down. Averaging down with individual stocks could be quite painful.

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Doesn't sound like it will work in this situation b/c of the investment vehicle being a ROTH

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Correct. There is no tax consequence to either gains or losses in a Roth.

My completely off-the-cuff guess is that by this time most of the decline in oil-related stocks is in the rear-view mirror and it might be an opportunity to buy more. But I haven't done any in-depth study, it's just something to think about.

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I generally sell if something gets below a 5 to 10% loss. One thing for sure is don't buy more if something has gone against you. Just because SDRL was at $43 once does not mean it will certainly make it there again.

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I'm certainly NOT taking a swipe at the OP. But if someone has a 60%+ loss, then clearly there wasn't a plan *prior* to making the investment or trade. I don't say that to rub salt in the wound, but it is a lesson for next time. And it applies to me as well as him.

As far as trading, what you're saying is 100% correct, whatever the predetermined stop-loss may be. But even in investing, you can't just set it and forget it. I've read accounts of Enron and HealthSouth investors and how they went from bad to worse by "averaging down" their losses. Other books I've read detailed how it's human nature not to want to admit when we're wrong, and then we chase the fantasy of "getting back to even" again.

The loss is the loss at this point... he just hasn't realized it yet. Only if there is a fundamental case for buying more would I buy more. I don't follow this security, so I have no opinion on it. IMO, it comes down to, could the proceeds from the sale go toward a better performing security or not?

Always remember the story that John Madden told about the football player who threw a $100 into the toilet so that he wouldn't feel so bad about fishing out the dollar.