Skip to content
INVESTINGSPARKLE
All worked examples

Illustrative example

Restarting after losing money on tips

Two years of acting on WhatsApp recommendations, a portfolio down significantly, and no idea what to keep.

Not a real client. These are illustrative scenarios written to show how the framework is applied. They are not real clients, not records of actual results, and not investment recommendations. The figures are chosen to make the reasoning clear.

The situation

Starting position.

Experience
Two years, entirely tip-driven
Portfolio
Six holdings, roughly PKR 600,000 invested
Position
Down meaningfully overall
Concentration
Two positions are more than half the total
Records
No record of why anything was bought
Emergency fund
Roughly two months of expenses

“I have lost money on almost everything I bought. Should I sell it all and start again, or wait to get back to what I paid?”

Working through it

The reasoning, in order.

  1. 01

    The question contains the mistake

    “Wait to get back to what I paid” is the purchase price making the decision. The market has no memory of what anyone paid, and the price at which someone becomes willing to sell says nothing whatsoever about what the business is worth.

    Replacing that question with a better one is most of the work here: for each holding, knowing what I know now, at today's price, would I buy this?

  2. 02

    The missing records are the real problem

    With no written thesis for any position, there is no way to distinguish “this fell because the market is being irrational” from “this fell because I was wrong”. Those require completely different responses, and without notes the distinction collapses into how the person feels about each stock.

    So the first exercise is retrospective: for each of the six holdings, write down now what the company does, how it makes money, what its debt looks like, and whether it is profitable. Not what it has done for the price. What the business is.

  3. 03

    Three of the six will not survive the exercise

    Typically, in a portfolio assembled from tips, a couple of holdings turn out to be reasonable businesses bought without understanding, a couple are marginal, and at least one is something the person cannot describe at all.

    The ones that cannot be described go, regardless of whether they are up or down. Not as punishment, because holding something you cannot evaluate means you will have no idea what to do next time it moves.

  4. 04

    Concentration is the more urgent risk

    Two positions exceeding half the portfolio is the more pressing issue than any individual holding being down. A single company-specific event could do damage that takes years to recover, and the arithmetic of losses is unforgiving: a 50% loss requires a 100% gain simply to return to level.

    Reducing those two toward a normal weight is the first structural change, and it is separate from the question of whether either is a good business.

  5. 05

    The emergency fund is the actual priority

    Two months of expenses is thin. It means any unexpected cost forces a sale, at whatever price the market happens to offer that week, which is precisely how a temporary paper loss becomes a permanent one.

    In this situation the honest advice is that building the emergency fund to five or six months takes precedence over any new investing. That is not what someone wanting to recover losses wants to hear.

Where it lands

The plan that comes out.

The plan is: write a thesis for each existing holding, exit the ones that cannot be described, trim the two oversized positions toward target weight, and direct the proceeds and new savings into completing the emergency fund before adding anything.

Selling at a loss is treated as recognising a decision already made rather than as taking a loss. The loss occurred when the position fell, not when it was sold.

New investing resumes only once the emergency fund is complete, with written theses from the first purchase onward.

What this example shows: Recovering from tip-driven losses is rarely about picking better stocks next time. It is about installing the record-keeping and position-sizing that make the next mistake survivable.

We teach. You execute. Your account. Your decisions. Always.

We do not take custody of your money or execute trades for you.

Other examples

Different situations.

Your numbers, not these ones

A Launchpad call works through your actual situation (income, savings, debts, horizon) and produces a written plan you own and execute yourself.

Book a callSee what is included