If I invested £5000 in Argo Blockchain shares one year ago, here is how much I would get now

If I invested £5000 in Argo Blockchain shares one year ago, here is how much I would get now

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Argo Blockchain (LSE:ARB) Stocks were a popular investment when growing stocks were in their favour during the pandemic. Many investors viewed stocks as a way to benefit from the massive rise in Bitcoin.

Unfortunately, the cryptocurrency miner has been producing disappointing investment returns lately. If I had put my money into the stock a year ago, I would now face huge losses.

Argo Blockchain Shares Fallen

This time last year, Argo Blockchain shares were trading at around 120p. However, today they are trading for just 15p. This represents a decrease of about 88%.

What this means is that if I put £5,000 into growth stock a year ago, my money would now be worth about £625 (ignoring trading commissions). This is a bad loss.

Of course, looking at just 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 making a decent profit.

Assuming I bought shares for about 7p, my investment of £5,000 would now come to about £10,700. So long-term investors are still rewarded here.

However, anyone who bought the shares after their big rally in early 2021 will be feeling some pain right now.

How to avoid big losses as stocks grow

One of the main points from the recent performance of Argo Blockchain stocks is that it is critical to “appropriately sizing” your equity positions relative to their risk levels.

Argo Blockchain has always been a high-risk and speculative stock due to its exposure to Bitcoin – which is notorious for volatility – and its lack of competitive advantage (literally anyone can mine Bitcoin). The stock experienced a massive rally in early 2021, which pushed its market value to very high levels (which increased the investment risk).

Now it is okay to invest in high-risk and speculative stocks. Because it can offer great returns. However, investors need to pay a lot of attention to risk management when buying these types of stocks because they can go down badly if things go wrong. You don’t want to be in a situation where a huge loss destroys your entire portfolio.

If I had invested only 1% of my total portfolio in Argo Blockchain stocks a year ago, the 88% loss here wouldn’t be the end of the world. A significant drop will not have a significant impact on my overall portfolio.

However, if I invest 30% of my portfolio in ARB Bank shares, the impact on my portfolio would be significant. My overall portfolio has probably taken a huge hit.

By sizing the right position, and keeping it small in relation to my overall portfolio, I could have significantly reduced my losses.

I will definitely keep this in mind as I will be adding more speculative growth stocks to my investment portfolio in the coming years.

the post If I invested £5000 in Argo Blockchain shares one year ago, here is how much I would get now first appeared UK Motley Bean.

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Edward Sheldon He has no position in any of the mentioned shares. Motley Fool UK has no position in any of the stocks mentioned. The opinions expressed about the companies mentioned in this article are those of the author, and as such may differ from the official recommendations we provide on our subscription services such as Share Advisor, Hidden Winners, and Pro. Here at The Motley Fool, we believe that thinking a variety of ideas makes it happen We are the best investors.

Motley Fool UK 2022

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