I thought it would be interesting to show a small table that outlines the issue with losing money, the figures below show what you have to ‘make back’ to get to break even depending on a certain amount lost.
Loss | Return needed to regain original sum |
-5.00% | 5.26% |
-10.00% | 11.11% |
-20.00% | 25.00% |
-30.00% | 42.86% |
-35.00% | 53.85% |
-40.00% | 66.67% |
-50.00% | 100.00% |
It’s easy to see that it gets harder to get back to zero the further you fall, the most obvious example being that you need 100% growth to break-even if you lose 50%! Just something to keep in mind as you are investing or weighing up risk in the things you invest in.