Stock price fell by 50%, is it cheap?

Stock price fell by 50%, is it cheap?

Since I first started dealing with stocks, the investors around me have been buying stocks with the concept that the lower the stock price falls, the cheaper it gets, saying that a big drop in stock price is actually a big promotion! It's time to sweep goods...

But this does not apply to every stock, and it's even a risky move for most people.

Because the percentage decrease and increase are not directly proportional, a 50% decrease requires a 100% increase to break even. Buying stocks at RM1 that drop to RM 0.5 is only a 50% decrease, but to rise from RM 0.5 to RM 1 requires a 100% increase. If you buy into the wrong stock that keeps dropping in price and continue to purchase, your wealth will keep shrinking.

Many investors consider a 50% drop as cheap, with a potential further decline of 50%, and a possibility of another 100% decrease — attaching my chart slides as reference, dropping 50% from point A to point B, another 50% from point B to point C, and a 56% drop from point C to point D.

Stock prices can continue to drop 100% from that point even after an 80% decline, not just remaining at 20%...

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