Those who urge people not to sell shares at a loss assume the following:
1. The market will somehow “miraculously” recover within a few days and will be climbing like hell
2. It will not continue this downward trend for the next several months.
3. A miracle will happen!!
4. Prices of shares will soon rise to previously high levels so one can still sell those shares bought so many months ago, at a profit?!!
The facts are:
1. We thought similarly several months ago and since then the market has come down over thousand points!
2. If someone sold at that point, even with a loss, he would have money with him rather than a portfolio of shares which are ever shrinking in value.
3. There is no lower limit for shares to shrink in value while cash will be cash and can even be used to buy back the same shares at a much lower level when market falls further and someday starts to rise.
4. When a portfolio shrinks in size the margin attached to it also shrinks in size till zero!!!
5. The price band will be applied even if the shares are half of the current value and normally the price band is applied on upward movements. – imagine how difficult the upward climb would be someday when market sentiment becomes positive.