Deciding a position is worth nothing is a decision, and it should be made explicitly

Companies rarely announce their own failure clearly. Setting criteria for writing a position to zero keeps records honest and stops dead holdings from consuming attention.

10 min read · Level 5

The point

Investors resist writing off positions because it makes a loss feel final, and the position usually feels like it might still come back. I think the honest framing is that the write-off does not cause the loss - it records one that already happened - and that a portfolio value including companies you have not heard from in two years is not a number worth having.

What is it?

Private positions often fade rather than fail cleanly. A company stops updating, operates quietly at a small scale, or continues with no realistic path to returning capital.

Useful criteria for marking a position at zero:

Criterion Typical threshold No contact no update or response for 12 months Operations ceased company has shut down or is dormant Preferences exceed any realistic value your class would receive nothing in a sale Failed financing could not raise and has no path to profitability Continuing but not returning capital viable business, no realistic exit for your shares

The last is the hardest. A company can be a reasonable small business and still never return anything to outside investors - sometimes called a zombie position. It is not a failure in the ordinary sense, and your holding may still be worth approximately nothing.

Writing a position to zero in your own records does not mean giving up any legal rights. You still own the shares, and an unexpected outcome can still occur. What changes is that your portfolio value stops including something you do not expect to receive, and your attention moves elsewhere.

Tax treatment of losses on worthless securities varies by jurisdiction and usually has specific requirements. Check local rules before assuming a write-off creates a usable loss.

Why does an investor care?

Because carrying dead positions at cost or at an old mark inflates a portfolio's apparent value and distorts every calculation built on it.

It also frees attention. Time spent following a company that will not return capital is time not spent on positions that might.

Educational, not personalised financial advice. Nothing in the Investor Academy is a recommendation to buy, sell or hold anything — what is right for you depends on your own circumstances and the rules where you live.

Example

Four positions reviewed against the criteria.

Position Status Decision A no update in 15 months, website offline write to zero B operating, 40% revenue decline, failed to raise write to zero, monitor C profitable small business, no exit path, no dividends write to zero in records, keep shares D quiet for 8 months but responded with figures keep at last mark

The portfolio's recorded value fell by 75,000. Nothing about the investor's actual position changed - they still held the same shares. What changed was that the portfolio figure now reflected what they realistically expected to receive.

The common mistake

Leaving failed or dormant positions at their last mark indefinitely, which overstates portfolio value and keeps attention on holdings that will not return capital.

How it works

Step 1: Write down your criteria in advance

Decide what evidence would cause you to mark a position at zero before you face the decision.

Step 2: Review all positions against them annually

Apply the criteria consistently rather than case by case.

Step 3: Separate the record from the rights

Marking at zero is an accounting decision; you retain the shares and any future upside.

Step 4: Check local tax rules on worthless holdings

Requirements for claiming a loss differ by jurisdiction and often require specific evidence.

When to use this

During an annual portfolio review, or when a company goes silent or fails to raise.

When not to use it

Do not write off a position after a single difficult quarter or a missed update. Criteria should reflect a sustained absence of contact or a genuine absence of a path to value.

How investors actually did it

A recurring pattern: companies that neither fail nor exit

Angel investors frequently describe portfolio companies that continue operating for many years at modest scale without raising further capital, being acquired or paying dividends, leaving early shareholders with holdings that produce no return and no resolution.

Plan for outcomes that are neither success nor failure. They are common, and they need an explicit decision rather than indefinite waiting.

Do this now

Write down the criteria you will use to mark a position at zero
List any position you have not heard from in over a year

Create a free account to read the rest and apply it to your own investing.

Related lessons

A paper gain is a price someone paid once, not money you have — Private positions are usually marked at the last round price, adjusted for dilution. That mark is an estimate that can lag reality, and only a sale or distribution turns it into cash. (10 min)
Selling early means accepting a discount; a wind-down usually means preferences take what is left — A secondary sale can return cash before a company exits, typically below the latest valuation. When a company winds down, creditors and preferences are paid first, and common holders commonly receive nothing. (11 min)
Cash and runway decide whether anything else gets the chance to matter — Runway - cash divided by net burn - is the single most important monitoring figure for an early company, because running out of money ends every other possibility. Fundraising time makes the real deadline earlier than it looks. (11 min)