How much returns will you get when buying stocks that have fallen from their all-time high prices?

Updated: Jul 30

KEY POINTS:

🔑 Returns received will start to magnify when buying into stocks which prices have fallen 20% below their all-time high level.


🔑 Its a much better strategy to add more positions for the main holdings in your portfolio, rather than adding new assets just because they are cheap.


🔑 Not all stocks will bounce back to their all-time high price.



TOOL:

🛠️: Returns calculator when you buy stocks that has crashed. (Maximizations.com) (download to use)



 

Best time to accumulate stocks = when the market is panic selling.


  • Market sentiment has been mostly fearful since 1Q of 2021 till date.

Stock Market sentiment, fear & greed index, market has been fearful

  • Global indices are lingering in the correction range since end 2021

  • Some of our favourite stocks' prices have fallen significantly from all time high

  • although their underlying fundamentals remain intact.

  • This is one of the best time for investors to dollar cost average on some of the main holdings in their portfolio.




Returns calculator when you buy stocks that have fallen from their all-time high prices.


  • You may refer and download this spreadsheet.

  • and insert your own figures accordingly to find out the potential returns.

  • To note:

  • In this sheet, I have set the intrinsic value of the stock to be 1x of the stock's all-time high price

  • Because ideally, we ought to hold these stocks until they reached their intrinsic value,

  • since that is when most returns are made,

  • especially when purchased at discounted price from market corrections.



Caveat: Not all stocks will bounce back to their all time high prices, many will not.


  • There are plethora of stocks which prices has fallen significantly from their all time high

  • for extended period of time and their price did not recover.


  • Example:

  • It could be due to company scandals that have occured.


  • or the company's inability to maintain their competitive edge in the market.




Better strategy: focus on buying stocks which are already in your portfolio that you have high conviction in, rather than picking up new ones for the sake of gains.


  • Because holding power is essential when buying stocks in an environment where market sentiment is fearful.

  • refer to this article here to learn more

  • Hence strong conviction on the underlying asset, derived from your due diligence prior to purchasing the asset

  • is a must in order to achieve this.

 


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