What happens when my shares lose money?

Question

i understand the basics of makin money by shares. the simple thing of if i buy shares at 100p and sell them at 120p i make 20p. this might sound stupid but what happens if the shares go down to 80p? is it just that thats all the shares are worth now so if i cash in now i have taken a loss? how do i completely lose my money? is that if the company goes bust?

Answer 1

Yo is right. If you can ,hold on to them. Anyway if they pay you dividends the may rise at the next payout.

Answer 2

Yes, that is how it works. You can sell your shares at 80p and accept your loss, or wait and see if they go back up.  Then again, they may go lower.  This is called "risk".  If the company goes bust, the shares will become worthless.

Answer 3

Yes

You lose 20p per share 'on paper'

Yes

Yes

As you say 1/. it is that simple and 2/. You only make a loss if you sell. (As David W says 'crystalise' the loss.)

If the company goes bust you usually lose all of your money. There may be some payout from the assets but as an ordinary shareholder comes last in the list of creditors it is very unlikely.

Answer 4

Yes, my dear. People lose money. And what you just explained is one way to do that.

Answer 5

If the share is now worth 80p down from a £1 it means that you have made a loss of 20p per share. If you have bought 100 shares and sell them at 80p you will only get £80 back when you had invested £100.  If you don't sell the shares but hold onto them, the share price might recover.  You only truly make profit or losses when you sell.  If the company goes completely bust you lose everything. Don't forget too that you might pay tax on the profit that you make.

Disclaimer:

The answers above are for guidance only and should not be acted upon without you receiving independent financial advice relevant to your circumstances.  To find and IFA please call 0800 085 3250 or go to http://www.unbiased.co.uk.

Answer 6

Shares price of a company goes up and down due to speculation, rumours, the state of the economy, expectations of the company's future earnings etc. But if all these does effect the company, it may go bust and have to liquidate. When this happens, trading in the shares will be suspended. You will have to wait for the final liquidation of the company by the appointed administrator to know whether you have completely lost all your money or not.

Answer 7

And you told me that the Ground Nut scheme was a great investment.

Answer 8

To keep it simple: More investors are wanting to sell your stock (shares) than to buy, that is why shares go down in price.  Yes if the company goes bust you'd have a hard time selling your shares for any amount.

Answer 9

YOU HAVENT LOST ANYTHING UNLESS YOU SELL THEM

Answer 10

Simple.  When shares rise in price you make money, when shares fall in price you lose money.

If you are investing in a serious way you should set yourself a stop/loss, do your homework before you invest, study the fundamentals and if possible the charts for the company concerned.

Also there is a free book (No. 5.) on the subject at the address below.

Hope this helps.

Answer 11

You haven't factored in the brokerage fees (usually a per centage fee) or stamp duty.  You will typically pay these fees on both the purchases and sales.  You have a loss on paper.  you haven't sold the shares so you haven't crystalised the loss.  The shares may go up in value, they may go down.  If they continue to drop youhave the ability to "average" which means you buy more shares at a lower price to bring your average cost down, this means that if the share price recovers, it doesn't have to got as high before you start to be in profit but beware, the price may drop further.  Unless you're a broker you are gambling.