QUESTION: Crises and drawdowns: when to cut losses and when to hold?

The dilemma between realizing a loss and holding positions during a market storm requires cold calculation and pre-prepared criteria. The main rule is that making such a decision at the peak of panic is strictly not recommended.

To understand whether you should sell an asset at a loss, ask yourself: has the fundamental business of the company or the issuer's economic performance changed for the worse permanently? If this is a temporary market correction and the company continues to generate profit and develop, it is better to hold the positions and wait out the unfavorable period.

However, if the asset was bought speculatively or the company's business faced insurmountable structural problems, cutting losses becomes a sensible step to save the remaining capital. Determine your acceptable drawdown level for each security in advance and write down the rules for exiting unsuccessful investments on paper so you won't hesitate at the moment of crisis.