Is it better to realize the loss and buy back in at the lower price or just hold it?
I'm not a big fan of hypothetical questions. It depends on what you're trying to optimize for, i.e. taxes or total return. Most investment advisors would tell you "don't let the tax tail wag the investment dog."
There's an opportunity cost to selling with the intent to buy back in at a lower price. What if it recovers as quickly as it dropped? What if it drops further?
Time in the market generally beats timing the market. If you liked the stock at $150 and intend to hold it indefinitely, you should love it at $100 and consider buying more instead of selling.
Adding my comment to the answer:
You can't realistically assume that you're selling and buying at the same price.
Even if you did, what's the point? If you're selling/buying near instantaneously the loss will be disallowed due to the wash sale rule, which prohibits selling an investment for a loss and replacing it with the same or a "substantially identical" investment 30 days before or after the sale.
If you wait long enough, it's virtually impossible to buy back in at the same price. At a minimum, you're crossing the bid-ask spread.
Answer from 0xFEE1DEAD on Stack ExchangeI was told that I have to constantly sell my stock then reinvest it to "lock in" profits. Is this true?
Selling at a gain: Buying back in and cost basis adjustment.. - Bogleheads.org
Probably Stupid Question: Why not sell now and rebuy when market is down?
Selling @ loss and buying back in a lower price
Is it better to realize the loss and buy back in at the lower price or just hold it?
I'm not a big fan of hypothetical questions. It depends on what you're trying to optimize for, i.e. taxes or total return. Most investment advisors would tell you "don't let the tax tail wag the investment dog."
There's an opportunity cost to selling with the intent to buy back in at a lower price. What if it recovers as quickly as it dropped? What if it drops further?
Time in the market generally beats timing the market. If you liked the stock at $150 and intend to hold it indefinitely, you should love it at $100 and consider buying more instead of selling.
Adding my comment to the answer:
You can't realistically assume that you're selling and buying at the same price.
Even if you did, what's the point? If you're selling/buying near instantaneously the loss will be disallowed due to the wash sale rule, which prohibits selling an investment for a loss and replacing it with the same or a "substantially identical" investment 30 days before or after the sale.
If you wait long enough, it's virtually impossible to buy back in at the same price. At a minimum, you're crossing the bid-ask spread.
If you're asking about taxes, you'd need to specify a country. If you're in the US (based on your profile), you'd have a wash sale unless you bought the shares back more than 30 days later in which case you wouldn't be allowed to deduct the capital loss. So in the US, unless you want to exit the position and stay out for more than 30 days before buying the shares back, you're better off holding the shares.
If you are willing to stay out of the position for more than 30 days, then it can be reduced to a math problem. But you'd need to make guesses about things like what the capital gains tax rate will be when you sell, what discount rate to apply to get the present value of future cash flows, etc. And if you're thinking of holding the shares until you die, potentially you'd never owe capital gains tax...