COVER STORY Dud investments team and had just secured some last-minute funding . Companies with a high cash burn can fold quickly if share-price falls mean that they can ’ t access capital . For every Amazon , there were another five companies that didn ’ t survive the dotcom bubble . As such , it is worth distinguishing whether the problem is with the market or the company . Laith Khalaf , head of investment analysis at AJ Bell , says that investors need to make an honest examination of why they bought the stock in the first place : “ If the conditions that led you to back it are still there , then in all probability you should hold on , or even top up if it doesn ’ t unbalance your portfolio too much . The market can be very irrational over short spaces of time , and mark down stocks without much rhyme or reason .” Burns says that if you ’ ve chosen your stocks for the right reasons – based on the quality of the underlying business , the strength of its financials and a thorough economic analysis – then there is absolutely no need to panic . “ While you may have no control over what the share price does in the short term , you will sleep well knowing
Unbalanced management
Funds managed by Baillie Gifford have been hammered this year , but the group has always drawn attention to what it calls the asymmetry of returns – meaning many of the stocks that have provided its biggest gains over the years had previously suffered some of the heaviest losses .
The group ’ s flagship trust ,
Scottish Mortgage , has halved in value since last year ’ s peak , but it lost even more in the financial crisis . Former manager James Anderson once said of this period : “ There ’ s nothing that I ’ m prouder of in my life . Enduring those months was absolutely central to our subsequent performance . I ’ m proud that we held our course , that we bought Apple on what turned out to be 3x prospective earnings , that we didn ’ t sell Amazon at $ 40 back in that dark autumn . That took resolve .”
you own solid , quality businesses , ones that are capable of riding out or even prospering from economic uncertainty ,” he explains . Khalaf adds : “ Keep it rational and reasoned though , and don ’ t chase losses for the sake of it .”
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