The Motley Fool

Lost money on Sirius Minerals shares? Here’s what I’d do now

Sirius Minerals’ (LSE: SXX) share price has tanked over the last year, falling nearly 90%. If you’ve lost a lot of money on Sirius, I have sympathy. Losing money on an investment is always painful. Been there, done that!

However, bear in mind that even the best investors (i.e. Warren Buffett) lose money on stocks at times. It’s part and parcel of investing. So, don’t let losses from Sirius put you off investing in the stock market – stocks still remain the best way to build wealth over the long run. With that in mind, here’s my advice if you’ve been a Sirius loser.

5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!

According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…

And if you click here we’ll show you something that could be key to unlocking 5G’s full potential...

Analyse what went wrong

If you’ve taken a hit on SXX, the most important thing you can do, in my view, is learn from the experience (there are five key lessons from SXX here).

Analyse what went wrong. Did you invest money that you couldn’t afford to lose? Were you familiar with the risks of investing in small-cap stocks? Did you have a good understanding of Sirius and its project? Did you have too much exposure to the stock? Were you caught up in the hype?

Think about your mistakes and write them down for future reference so you don’t make the same mistakes in the future.

Having lost quite a large amount of money on small-cap mining stocks during the Global Financial Crisis myself, I can say without doubt, the experience has made me a much better investor. Instead of just focusing on the potential payoff (how much money could I make?) of a stock, I now pay much more attention to risk management (how much could I lose and how would this impact me?). 

So, for example, I now:

  • Invest around 60-70% of my portfolio across a broad range of lower-risk dividend stocks that provide regular income and enable me to compound my wealth

  • Only invest around 10% of my overall portfolio in small-cap stocks

  • Only invest around 1-2% of my capital in each individual small-cap stock 

  • Focus on profitable companies when investing in small-caps 

  • Steer clear of small-cap miners

This strategy has dramatically reduced my stock market losses.

Build a diversified long-term portfolio

Once you’ve thought about what went wrong, my advice would be to focus on building a rock-solid long-term portfolio that’s properly diversified and suitable for your individual risk tolerance.

If you’re looking for more stability from your investment portfolio, you may want to focus more on large-cap dividend-paying stocks. These aren’t as exciting as stocks like Sirius, but you’re far less likely to lose large amounts of money and over the long run they can certainly boost your wealth, particularly if you reinvest your dividends.

If you’re keen to include small-caps in your portfolio, make sure you think about risk management. For example, diversify your capital over a number of stocks in different sectors. This way, if one underperforms, your overall portfolio won’t be impacted too badly.

Investing doesn’t need to be complicated. But it’s important to get the basics right and that means focusing on risk as well as reward. If you’re looking to learn more about how to build a winning long-term portfolio, you’ll find plenty of information here at The Motley Fool that could help you. 

5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!

According to one leading industry firm, the 5G boom could create a global industry worth US $12.3 TRILLION out of thin air…

And if you click here, we’ll show you something that could be key to unlocking 5G’s full potential...

It’s just ONE innovation from a little-known US company that has quietly spent years preparing for this exact moment…

But you need to get in before the crowd catches onto this ‘sleeping giant’.

Click here to learn more.

Edward Sheldon has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Our 6 'Best Buys Now' Shares

The renowned analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply enter your email address below to discover how you can take advantage of this.

I would like to receive emails from you about product information and offers from The Fool and its business partners. Each of these emails will provide a link to unsubscribe from future emails. More information about how The Fool collects, stores, and handles personal data is available in its Privacy Statement.