PSA: 30% loss means the stock needs to go up by 43% to return

This should be a basic no-brainer but everytime you see a stock go down 5% at the current price level. If it increases back by 5% it doesn't go back to its old price.

To illustrate.

10% loss needs 11% gain to return. 20% needs 25%. 30% needs 43%. 40% needs 67%. 50% needs 100%. At 90% drop your stock will need to go up by 900% to return to its old price.

Right now you're seeing NASDAQ dropping double digits and futures are down mid singles almost everyday.

The power of compounding works both ways.

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2 days ago
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2 days ago

If you can't take a 4% market drop then you need to adjust your strategy

It seems that everyone has become so accustomed to massive yearly gains in the stock market. If you're thinking about selling your investments after a minor drop in the market, then you really need to adjust your strategy. Maybe consider a money market fund or speaking to a financial advisor.

Everyone seems to have forgotten the risk that comes with investing. We have seen gains in the last few years that are unlikely to be repeated in the near future. There have been past periods where the market has been down over a significant number of years.

If you have time on your side and are diversified in index/mutual funds then you need to stay the course. If you have all of your money in a few individual tech stocks then you need to restrategize or stop complaining when you lose a significant amount of money.

If you are a new investor, it can be easy to get discouraged in these type of scenarios but as the market goes down, your future purchases will be at a lower price. Nothing is ever guaranteed and nothing goes up in a straight line.

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2 days ago
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2 days ago