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Old 01-09-2015, 09:02 AM
 
18 posts, read 25,803 times
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I started investing in the stock market in 2008 just in time for the Bear Market. Within a year many of my stocks that I spent so much time picking and the experts say were a sure thing were down over 50%.

My friends and family told me that it was just paper losses and they would come back. While the market eventually came back many of these hot stock picks never did come back and I still have them in my brokerage accounts.

Now it is 2015, 7 years has passed and many of these individual stocks are still way down from the 2008 price I bought them at. I don't see them as ever coming back and don't see them as paper losses but losses, even though I have not sold them.

How do you see so called paper losses? If your portfolio is way down from when you bought the stocks do you feel poorer?

(I don't believe in the concept of paper losses. If I can't sell the stock today at the price I bought it at, it is a loss and I am poorer as a result.)
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Old 01-09-2015, 09:10 AM
 
5,342 posts, read 6,140,796 times
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Technically they are paper losses until you need the money, but if the integrity of the company you invested in has changed then you should not be investing in it and you should take the real losses and invest in something else. If these companies are still down today after the huge % increases the market has seen since 2011 there is likely something wrong with the company.
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Old 01-09-2015, 09:11 AM
 
105,995 posts, read 107,954,552 times
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there is no such thing as paper losses.

that is your real net worth and value of the investment at any point in time. selling and locking in a loss or gain is a taxable event if in a taxable account.

there is no difference keeping your money in play each day in the same investment vs closing out the position and buying another.

the gains or losses are the same and is only based on what goes on with the amount you have invested.

if you are a long term investor in the markets ,yes a drop can be only temporary , or it can span 20 years.

that is a different issue than saying it does not count because you didn't sell.

a loss is a loss and a gain is gain. it is like working on commission and each day brings something new.

I check my net worth yearly and as sure as the sun rises that is my net worth whether I am selling everything or not , it just varies through the year.
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Old 01-09-2015, 09:17 AM
 
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Now I buy stocks with a dividend, so if they go down, at least I get some dividend income while I wait for the stock to move back up.
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Old 01-09-2015, 09:18 AM
 
Location: MO->MI->CA->TX->MA
7,022 posts, read 14,425,394 times
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Quote:
Originally Posted by A Professional View Post
I started investing in the stock market in 2008 just in time for the Bear Market. Within a year many of my stocks that I spent so much time picking and the experts say were a sure thing were down over 50%.

My friends and family told me that it was just paper losses and they would come back. While the market eventually came back many of these hot stock picks never did come back and I still have them in my brokerage accounts.

Now it is 2015, 7 years has passed and many of these individual stocks are still way down from the 2008 price I bought them at. I don't see them as ever coming back and don't see them as paper losses but losses, even though I have not sold them.

How do you see so called paper losses? If your portfolio is way down from when you bought the stocks do you feel poorer?

(I don't believe in the concept of paper losses. If I can't sell the stock today at the price I bought it at, it is a loss and I am poorer as a result.)
Unrealized Gain Definition | Investopedia
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Old 01-09-2015, 09:21 AM
 
105,995 posts, read 107,954,552 times
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means zero. they sold off a piece of the value of your investment and gave it to you. next quarter kicks off less that money so the compounding from market action is on less money.

if you reinvest the dividend then your investment value is pretty much the same before and just after the payment . the compounding over the quarter is identical whether you got the deividend and reinvested it or didn't get one at all and growth was just appreciation.

this is a very concept not understood most of the time.
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Old 01-09-2015, 09:24 AM
 
105,995 posts, read 107,954,552 times
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Quote:
Originally Posted by ragnarkar View Post
while you do not know your total return until you sell in that particular investment , whether you are up or down is your net worth and the value you have access to in your portfolio. ooooh it counts for sure,. in fact while you do not know that individual investmen's final total return you do know the total return you are seeing based on your value to that point .

I can tell you my entire opening withdrawal rate in july when I retire will be based on that portfolio value whether I sell or not.
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Old 01-09-2015, 09:25 AM
 
18,494 posts, read 15,469,192 times
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Quote:
Originally Posted by mathjak107 View Post
means zero. they sold off a piece of the value of your investment and gave it to you. next quarter kicks off less that money so the compounding from market action is on less money.

if you reinvest the dividend then your investment value is pretty much the same before and just after the payment . the compounding over the quarter is identical whether you got the deividend and reinvested it or didn't get one at all and growth was just appreciation.

this is a very concept not understood most of the time.
No. A dividend is NOT a partial sale of the company. If you own 1/10000 of XYZ and it issues a dividend, you STILL own 1/10000 of XYZ. Nothing has been sold.
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Old 01-09-2015, 09:26 AM
 
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Then why do we have to pay taxes on dividends then?

Quote:
Originally Posted by mathjak107 View Post
means zero. they sold off a piece of the value of your investment and gave it to you. next quarter kicks off less that money so the compounding from market action is on less money.

if you reinvest the dividend then your investment value is pretty much the same before and just after the payment . the compounding over the quarter is identical whether you got the deividend and reinvested it or didn't get one at all and growth was just appreciation.

this is a very concept not understood most of the time.
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Old 01-09-2015, 09:27 AM
 
105,995 posts, read 107,954,552 times
Reputation: 79579
the company is selling off a piece of your share price. either you can sell off a piece of your share or in effect they sell off a piece of the share price and give it to you.

to understand why you need to understand the mechanics of a dividend.

from ssa-understanding dividends

" Dividends are Not Free Money
Another common misconception is that a dividend is free money. Many uninformed investors scramble to get into a stock before the ex-dividend date in the mistaken belief that they will somehow end up ahead for having done so. This is not true because on the ex-dividend date the previous day's closing price will be reduced by the amount of the dividend.* This is because the rights to the dividend are no longer transferred with the sale of the stock and since the payment of the dividend has reduced the net value of the company by the same amount, the net value of a share of stock is proportionally less. For example, a stock that pays a dividend of fifty cents per quarter and trades at $10.00 on the last trade of the day before the ex-dividend date will then have that closing price adjusted down at the open the next trading day (the ex-dividend date) to $9.50. The fifty cent dividend is no longer available to buyers on the ex-dividend date, so that amount is deducted from the stock's price. Theoretically, and indeed commonly in practice, the stock will not open at exactly $9.50, because market forces may drive the price higher or lower, but in any case, the dividend-adjusted price of $9.50 will remain as the basis upon which the daily change is calculated. If, for example, the opening price is $9.00, the daily change at that point will be down $.50. Indeed the price is a full dollar less than the closing price of the previous day, but because of the adjustment for the dividend, in reality the value has changed only fifty cents.

In addition, at the open on the ex-dividend date, all open orders will be automatically adjusted down by the amount of the dividend unless they have been placed with a Do Not Reduce restriction. these are exchange laws not an optional choice.

So, buying a stock before the ex-dividend date simply to capitalize on the (false) idea that a dividend is free money is nothing more than a beginner's mistake."
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