Small and medium investors are in a position to use certain strategies to stop the reduction in market capital until that moment, that is to say, capital losses. Generally as a consequence of the operations of buying and selling shares on the stock market. But also other products intended for investment (investment funds, warrants, listed, etc.). But the most interesting thing about these strategies is that they can even serve to benefit you fiscally in the next income statement. That is, it can have a positive effect that you cannot detect in all its intensity right now.
From this general scenario, it will be very important that you try to find some kind of solution to the stock market problems that your investments have generated. Especially in more bearish scenarios of the financial markets and where it is very feasible that you could lose 20% or 30% of the invested capital. Or even more so in the most negative situations where falls in equity markets are particularly violent. To the point that there will come a point where you come to ask yourself the following question: are there really strategies to deal with handicaps?
Of course, there are no magic recipes to correct this serious problem that you may develop at some point in your life as a small and medium investor. However, through some guidelines or advice you can face the falls that national and international equities are going through at a certain time. So that in this way, on the one hand you can stop loss of capital that you are suffering. And on the other, you are in a better disposition to boost operations in the equity markets.
Disabilities: aspect to consider
In all cases, you will have no choice but to identify the profile you have as stock market users. Like the main characteristics of the investment that you have made in each of the moments. And which are the following that we expose you below:
Liquidity level: It is necessary to differentiate between users who need financial resources from those who do not. In this sense, you should not forget that the first of them will have the need to sell their shares to solve the problem. While the remaining investors will have more time to recover their investment. That is, the shares can be close to the price at which the purchase was made.
Term of stay: There is no doubt that being in the long term is not the same as being short. To the point that depending on this important parameter you will opt for one or another strategy to stop the losses you have in your securities account. You will have no other solution than to identify the term of the equities operations.
Invested capital: It will be very beneficial to take solutions to this problem that you take into account the amount of these operations in the stock market. Because in effect, a treatment for an investment of 3.000 euros is not the same as the one that requires another 100.000 euros. There will even be a notable divergence in the solutions you have to take from now on. Not surprisingly, your treatment will be significantly different in each case.
Guidelines to stop losses
Now comes the most interesting moment of this article and it is the one that refers to the solutions that you have in hand to correct this worrying incidence in the world of the stock market. Well then, don't worry because you have from now on several alternatives to contain a hemorrhage of falls in equities. Do you want to know which ones with some of the most relevant? Well, pay a little attention because you can be very useful so that you can get out of some other unfavorable scenario for bags.
Tax exploitation of handicaps: depending on the capital generated during this year and depending on the stock market losses you suffer, you can make partial or total sales of the securities that are undervalued with respect to the purchase price for the next income statement. It is a matter of doing numbers, calculating what benefits can be reported by making these sales and, in case of doubt, the most reasonable thing is to go to a tax advisor who will be in charge of deciding whether or not this operation should be done. Currently it is one of the most profitable options for the interests of small and medium investors.
Partial or total sales?
It is an operation that will depend on some of the factors discussed in the previous chapter. Because it will not always be the same scenario and despite what you may create initially. If not, on the contrary, this performance in the financial markets will depend fundamentally on the capital invested and especially the period of permanence to which the investment is destined. As you have seen, it will not be the same treatment in all cases, but a different action will be required in each case. Because you cannot forget that each one of them has nothing to do with the rest.
From this general approach, comes the most decisive moment of all. In which you will have to state what you have to do from now on. That is, whether to make total or partial sales so as not to lose more money in your positions in the stock market. Well, in this sense, nothing better than to act according to the stocks you have in your portfolio at those moments. But always taking into account a very relevant aspect such as whether you are going to need that money in the coming months. Or if on the contrary you can allow yourself to continue with the open movements for a couple of months or even a year.
Always keep positions
Another alternative that you can take advantage of in this possible scenario is not to vary your investment strategy in the least. This in practice translates to doing absolutely nothing in stock market operations. With the primary objective of waiting for the markets regain calm and ensure that the prices of each security reach, at least, the purchase price during a period of time that your domestic economy can assume. It is a certainly conservative option that is indicated for those investors with a defensive profile who do not have liquidity problems and who direct their investment in the medium or long term.
Not all users can afford to go for this drastic solution. But everything it will depend on if you are going to need liquidity to meet personal or family expenses for the next few months or years. For this you will have to review what your source of income is from now on and that will determine the decision you are going to make about this problem that arises and that can even create more of a headache at night. Not surprisingly, you are playing a lot with this decision that you have before you right now.
Take advantage of the cheapest prices
In any case, if you are of a more aggressive profile, you have a strategy that can be very useful in the face of the longest terms of all. Not surprisingly, it can assume that you take advantage of low stock prices to improve your positions in equities. Because in effect, it is that simple as you will be able to see below. It is a tactic that is based on performing selective purchases in order to recover your financial contributions. But under a higher price than what they have at the moment. So that in this way, you can not only get away from the handicaps, but also that another part conforms the base of what will be a fruitful investment of your savings.
This investment strategy is very effective when the declines are the consequence of a very punctual downtrend. To the point that you will meet some stock prices that will be very appetizing as to despise them. However, you must have a lot of cold blood and above all that you are supported by a savings account powerful enough to meet this special demand that you have as a small and medium investor. You must value above other considerations that your values can rise above 15% in a short space of time.
In any case, you should bear in mind that this strategy is really effective when it comes to securities that are characterized by their low volatility and the strength they present in their stock market performance. Where the movements are not very violent and can recover their original price more easily, among other reasons because their falls in the financial markets are as violent as in other proposals on the stock market. Beyond other systems that you can use to deal with the losses that can be installed in your income statement. Which is, after all, what it deals with in these cases.