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How to recover from bad investments

Posted at | Updated as of 04/19/14 5:07 PM

MANILA, Philippines – Unless you are extremely lucky, losing money is common either through bad investments, mismanagement or foolish purchases.

But according to Vittorio Gomez, a board of trustee at the Fund Managers Association of the Philippines, the first step in recovering from a bad investment is not to panic.

He said most investors lose more money due to rash decisions after making a bad investment.

“Do not throw good money after bad. It will have to come from someplace else,” Gomez told ANC’s “On The Money.”

If time is an issue, investors should consider checking their lifestyle and determine where they can cut back, and find a way to reinvest.

“Adjust your risk parameters, you don’t have to be in highly volatile investments. You can invest in the money market if you need the money soon,” he said.

“The number one thing you don’t want to do is hold cash, because if you want to lose money, hold cash,” he added.

Gomez reminds investors that “time is your best friend in the stock market,” but you should also know why you’re investing in the first place.

“You should always assess the risk that you are willing to take. If you are jittery about the market the maybe you should consider narrowing your focus to safer bets,” he said.

Safer bets are those companies with big names and have good historical earnings, growth and can sustain dividends.

If you are just starting out, Gomez said it is advisable to invest in dividend earning stocks.

He added that quick and calculated decisions will help you recover from a bad investment, for instance if a bond is on the verge of bankruptcy or if an equity or stocks is about to get delisted, you should sell it right away.

“But if it’s just a stock price dropping due to emotional reasons but if you look at the underlying value, it’s still there, then don’t sell it,” he said.

Gomez also urged investors to stay updated with regulatory bodies and business news so you can differentiate between rumor and fact.

"If what you are hearing is hearsay or some speculation, try as much as possible to reconfirm that rumor and move from there," he said.