Over the years I have had the privilege of working with just about every type of market participant there is. From day traders, swing traders, long term investors, retail, and insiders. While each style of trader has their own tendencies, and flaws I was able to make some keen observations. One thing that is pretty common among the longer term investors is the desire to keep a portfolio full of smaller positions, rather than "bet the farm" on one or two big names. Over the years the investors have realized that spreading out and choosing many little positions is statistically much better.
Even with the best position sizing, and diversification advice, you will eventually encounter a stock that makes such a big move in one direction that you couldn't possibly plan for it. Now, thankfully these odd moves come mostly in the bio-tech sector, but there are a handful of "black swan" events that have occurred over the years that have left many scratching their heads. So what can you do if you realize that one of your holdings has had a large decline?
First off, don't panic. Remember this is an investment for the long term. When you determined your position size, its very likely that you didn't bet the farm with a long term mindset. The first course of action is to see why the stock made such a large move. The news isn't going to make your loss back, but it will help you better understand why people over reacted. Also, does the news cause you to change your opinion from the original reason you entered? If so, then it may cause you to exit or at least reduce your investment.
If you decide to hang on then the question comes, "should you invest more?". This is a tough one to answer generally speaking, but many will look at a situation like this and say "well now I'm getting to invest at a discount." If you feel that investors have over reacted then you may be salivating at the opportunity to own shares with a lower cost.
Finally, if you do not want to increase your position, you may consider selling calls against your position. Options have become so popular in recent years that you may find a decent options market on your symbol. If this is the case then selling calls will help you start to reduce your cost in the long run.
As, you see, you are not without options. Keep a cool head, evaluate and move forward.