Has Your Stock Portfolio Broken Even?
With the stock market decline, let’s reexamine the mathematics of investments. How much gain do you need to erase your loss? The answer may surprise you.
A drop of 10% and a recovery of 10% doesn’t mean you have broken even. In this case, -10% + 10% does not result in you breaking even.
The greater the drop in your portfolio, the greater the increase is needed to break-even.
Example 1: Your $100,000 portfolio drops by 10% to $90,000. You will need a 11.11% (10,000 divided by 90,000) increase to return to $100,000.
Example 2: Your $100,000 portfolio drops by 20% to $80,000. You will need a 25% (20,000 divided by 80,000) increase to return to $100,000.
Example 3: Your $100,000 portfolio drops by 25% to $75,000. You will need a 33% (25,000 divided by 75,000) increase to return to $100,000.
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