Let’s say Samantha invests $100,000 in the stock market and in a gigantic downturn, she loses half. Not great for Samantha, since she was planning on sending her son to college soon and now she has $50,000. Perhaps it’s time to pick a new school, but first let’s do the math.
Quick question: How much does she need to gain to get back to even?
Did you guess 50%?
Wrong! When you lose 50% and you then gain 50%, you end up at 75%. If Samantha gained 50% after her bad run of luck, she’d be up to $75,000 … not the 100-grand she invested from the get-go.
To get back to where she started and get her son packed off to college, Samantha’s going to need a whopping 100% return! So remember, the greater the losses … the greater the needed rebound just to get back to even.
If you lose … You’ll break even with …