@GazD I think we all go through this same mental game.

My thoughts are to have regular reviews of your PF and keep determining what your best idea is:

Then... has the market given you an opportunity to allocate?

If Yes, then allocate

If No, then wait

Same process for selling/re-allocating.

Is Sp3 your best idea right now?

Love this question, I try to simply my decision making, as much as possible so keen to hear how others do this too!

JW

@GazD I think you have to remove the 50% loss as that is already gone and shouldn't really influence your next decision (I know easier to say than do!).

I would approach whether to buy more as a totally new investment decision. I would decide how much I was prepared to loose from my total portfolio if I was wrong and at what price this requires me to sell out if it kept going down (this is something I struggle with but I increasingly think it is a key aspect of successful investing). If you didn't own any today how much would you buy as a first investment at this price. If in addition to what you already own their is room to add more then you can assess under a framework for what to do if it continues to fall.

I think it is a risky strategy in a bear market to buy into a falling share price, especially for small speculative companies. It is difficult not to and I have been guilty of it but one of the things that still surprises me is how much cheaper a companies shareprice can go when sentiment is against them.

so 10 - 15% per holding? That sounds very concentrated to me… I can see pros and cons. I would not put 10-15% in SP3 myself

I have 26 stocks in my RL ASX portfolio, but only 7 make up 50%. They are my highest conviction holdings.

All my SM are in my RL.

(However, even my ASX portfolio is only 7% of my total assets, with most of the balance being international shares and bonds.)

If the conviction in the holding has not changed and there has been a mispricing, then it could be a good idea to buy more.

If you feel there has been a change that does not fit your view, or you find a better idea, may be better to reduce or let go and go for the other idea

It is all down to opportunity cost. What is the cost of holding something going down when there could be others going up?

However, averaging down a holding is not pleasant and there is a high probability of failing. I think I've done it a few times and maybe only twice it has worked.

Thanks @edgescape @mikebrisy @Greenblatt @Slideup @west for your insights. Appreciate the thoughts and comments.

I've definitely managed to separate in my mind the 1) what is the share price doing? from the 2) How is the business going? and the 3) why is the market doing what it's doing/am I missing something?

In this case I guess what I've gleaned from everyone is it all comes down to conviction. It does come down to your holding too, however, I could be convinced this is the best idea I have and grossly undervalued by the market but a 50% holding would be reckless.

I think one of the (potentially false) ideas preventing me from buying more is the market cap of the business, but also the early stage financially. SP3 has not hit sustained profitability and I suppose any stock pre profit should probably be limited to a certain holding size/percentage...

@GazD, another consideration is what proportion of your asset base is the small/microcap share portfolio.

It is much more risky if, say a 100k small cap portfolio forms the bulk of your asset base, compared to a 100k portfolio forming say 10% or less of your asset base.

Proportion relative to your whole portfolio is what counts.

My approach is this - I don't buy ETFs because my super is effectively an ETF, invested in international (80%) and domestic (20%) shares, in a fund with a tiny management fee, making SMSF uneconomic.

My other assets outside of shares are much larger than the relative investment in small caps, but of my direct share portfolio, some 90% is small caps now. The top ten holdings account for 60% of this portfolio, but a much smaller fraction of investable assets. I still think this is over-diversified, and am working on increasing concentration.

The rest as you say is conviction.

Yes 100% @nerdag Couldn't agree more that the proportion of total assets we're considering is more important than the proportion of the portfolio!

@Slideup I can see exactly what you mean about disregarding the 50% loss but I don't regard it as a loss tbh. This is a tiny microcap with a float of 134 million shares (or $4million dollars) worth of shares (per yahoo finance) so I would expect the SP to fluctuate around pretty wildly particularly in the current macro environment. And I suppose the drop of 50% on what I consider good news has me wanting to add but I think I'll sit on my hands for now. Not because I'm concerned about buying a falling small cap but simply because I'm happy with my exposure as is.

More generally I've been buying all the way through the falls of 2022. I probably should accumulate a little cash (completely invested) in case of more opportunities.