Who’s buying

Q When lots of investors sell a stock, its price drops. I get that. But who is buying all those shares? — P.L., Santa Barbara

A There’s generally a buyer for every share that’s sold. You can think of the stock market as an auction, where stocks trade at prices that buyers are willing to pay and sellers are willing to take.

So if the Free Range Onion Company (Ticker: BULBZ) is implicated in an accounting scandal, many investors might decide to sell, but many buyers, thinking that the stock is now worth a lot less, may only buy at that much lower price. A company may be facing terrible troubles, but at some point, its shares will be low enough that some investors think they’re a bargain. Q I bought some shares of Rite Aid a few years ago for around $100 each. They’re now trading below $10 per share. I don’t want to sell them for such a loss. Will the stock ever recover? — F.E., Springfield, Missouri A Try not to think about your purchase price, how much you’ve lost or how the stock has behaved in the past. What matters most in this situation is what you expect of the stock from this point on.

Rite Aid has been struggling for years, and its future is uncertain. If you think it will rebound significantly, hang on to your shares. If you think it will grow in value slowly, you might sell and invest in a company that’s growing more quickly. If you think it will stagnate or fall further, it’s smart to sell — and move the proceeds into a stock you do believe in. You should be invested in only your best ideas.