If I had invested £5,000 in Argo Blockchain shares 1 year ago, here’s how much I’d have now
Argo Blockchain (LSE: ARB) shares were a popular investment when growth stocks were in favor during the pandemic. Many investors saw the shares as a way to capitalize on the explosive rise of Bitcoin.
Unfortunately, the crypto miner has given disappointing investment returns lately. If I had put my money in the stock a year ago, I would now be facing huge losses.
Argo Blockchain shares are down
This time last year, Argo Blockchain shares were trading at around 120p. Today, however, they change hands for just 15p. This corresponds to a decrease of around 88%.
What this means is that if I had put £5,000 into the growth stock a year ago, my money would now be worth around £625 (ignoring trading commissions). It’s a disgusting loss.
Of course, looking at one year’s performance doesn’t tell the whole story. If I had put £5,000 into the stock four years ago, shortly after the company’s initial public offering (IPO), I would now be sitting on a healthy profit.
Assuming I picked up shares at around 7p, my £5,000 investment would now be worth around £10,700. So long-term investors have continued to be rewarded here.
However, anyone who bought the stock after the big peak in early 2021 will be feeling some pain right now.
How to avoid big losses with growth stocks
An important part of the recent development of Argo Blockchain stocks is that it is crucial to “right size” your stock positions according to your risk levels.
Argo Blockchain was always a high-risk, speculative stock due to its exposure to Bitcoin – which is notoriously volatile – and its lack of competitive edge (literally anyone can mine Bitcoin). And the stock had experienced a huge rally in early 2021, pushing its market value to very high levels (increasing investment risk).
Now it’s okay to invest in high-risk speculative stocks. Because they can potentially deliver great returns. However, investors need to pay a lot of attention to risk management when buying such stocks, as they can crash badly if things go wrong. You don’t want to be in a position where one big loss blows up your entire portfolio.
If I had invested just 1% of my overall portfolio in Argo Blockchain shares a year ago, the 88% loss here would not have been the end of the world. The large decline would not have had too much of an impact on my overall portfolio.
However, if I had invested 30% of my portfolio in ARB shares, the impact on my portfolio would have been significant. Chances are, my overall portfolio would have taken a big hit.
By sizing the position correctly, and keeping it small in relation to my overall portfolio, I could have reduced my losses dramatically.
I will certainly keep this in mind as I add more speculative growth stocks to my investment portfolio in the coming years.
The post If I had invested £5,000 in Argo Blockchain shares 1 year ago, here’s how much I would have now appeared first on The Motley Fool UK.
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Edward Sheldon has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the stocks mentioned. Views on the companies mentioned in this article are those of the author and may therefore differ from the official recommendations we provide 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.
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