Sell a stock a loss?

Can someone clarify this for me? I was reading online that people sell their stocks at a loss so they’re cash heavy for a buying opportunity? How does that make sense?

From what I understand if you bought bitcoin at $50,000 and sell for $45,000, you just lost $5000? So now to be profitable you need to surpass $50,000 again to recoup the loss and be profitable? Why not just stay at $50,000?

I’m not sure what you mean by “stay at the $50,000”? In your scenario the value of the bitcoin has already fallen to $45,000?

Hey Jeremy! Sorry I meant why not just hold at $50,000 if you have to surpass that anyways when you sell at $45k to be profitable again?

I think the main reasons someone might sell an asset are:

  1. they need the money
  2. they have a negative view on the asset / have a more favorable view on a different asset
  3. tax loss harvesting (this is usually mixed with the second point)

In your example, the only reason I can think of for selling at a loss might be so you could be ready for a buying opportunity if you think prices are going further down. Meaning, you originally bought at 50, you then sell at a loss at 45, and then HOPE to buy back at 35. But, the keyword in that sentence is “hope”. The chances of selling at the right time and then buying back at the right time are incredibly low and that would be considered speculating rather than investing!!

1 Like