If an ASX share you own falls, do not decide to hold or sell based on the price drop alone. Check what has changed at the company, whether the investment still fits your goals and timeframe, how much risk you can bear, and whether the holding leaves your portfolio too concentrated. Before selling, consider brokerage and tax consequences. A fall may be temporary volatility, but it can also reflect deteriorating company information; there is no basis for assuming a particular share will recover.
Start with the facts, not the share-price chart
First confirm the number of shares you own, what you paid, and the current position using your account records. Then look for relevant company disclosures and ASX announcements. ASIC Moneysmart recommends keeping investment records and checking reports and announcements for listed companies. Track your investments.
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Try to establish what may have driven the fall rather than guessing from the chart. Price movements can reflect broad market sentiment, sector conditions, company-specific news, or a mix of factors. Moneysmart explains that prices move as information changes and investors buy and sell; a price move by itself does not identify its cause. What is share market volatility.
Check whether the company’s prospects have changed
Review the company’s latest results, annual report and ASX announcements. Focus on information that could affect its ability to perform, rather than treating your purchase price as proof that the share is now cheap.
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- Revenue and profit: Are sales and earnings tracking in a way that supports the original reason you bought?
- Debt and cash flow: Does the company appear able to meet its obligations and fund its operations?
- Dividends: Has the company changed its dividend outlook? Dividends can fall or stop, and are not guaranteed.
- New disclosures: Do announcements materially change the outlook, risks, or assumptions behind your investment?
Moneysmart’s guide to researching shares discusses company disclosures and financial measures to consider. Choosing shares to buy.
Revisit your investment plan and personal circumstances
Ask whether the share still fits your goals, when you may need the money, and how much loss you can tolerate. A share may be unsuitable even if the company’s outlook has not changed—for example, if your financial needs or risk tolerance have changed. Conversely, a fall alone does not establish that the original investment case is broken.
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ASIC Moneysmart describes shares as long-term investments, using at least five years as an overview timeframe, while warning that prices can fall quickly. A longer horizon does not guarantee that a particular share will recover. Choose your investments.
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Consider how much of your overall portfolio depends on this company, its industry, or the Australian market. Diversification across companies, sectors, countries and asset types can reduce the effect of poor performance in one holding or market on a portfolio. It cannot prevent an individual share from losing value. Investment diversification.
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Compare the decision to hold or sell
There is no evidence-backed percentage fall that automatically means you should sell. Instead, compare the two choices against the same questions:
| What to assess | Question to ask |
|---|---|
| Company information | Do recent results or official disclosures strengthen or weaken the reasons you bought? |
| Goals and timeframe | Does holding still fit when you expect to need the money? |
| Risk capacity | Can you bear further losses without undermining your financial plans? |
| Portfolio concentration | Would keeping the position leave too much of your portfolio tied to one company, industry or market? |
| Costs and tax | What brokerage and possible tax consequences would a sale create? |
Selling during a fall can lock in a loss, but that is not a reason to hold automatically if the company information or your circumstances no longer support the investment. Moneysmart advises investors not to decide to keep or sell solely because an investment has fallen in value. Track your investments.
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Check brokerage and tax before selling
A sale can involve brokerage. If you sell below what you paid, you may realise a capital loss; tax treatment depends on your individual circumstances. Dividends and realised gains may also have tax implications. Check the current rules and your records, and seek tax advice if you need help working out your position. Moneysmart outlines share transaction costs and tax considerations in How to buy and sell shares.
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If you cannot tell whether the company’s outlook has changed, the decision has significant consequences for your finances, or you are unsure how the holding fits your broader plan, consider speaking with a licensed financial adviser. An adviser may help you understand your options or build a diversified portfolio. A general online tip or short-term price target cannot account for your personal circumstances.
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For a long-term holding, Moneysmart says reviewing investments every six to twelve months can be a useful starting point; significant announcements or a change in your circumstances may also warrant a review. Track your investments.
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