Maths – Preservation of Capital

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I wish to remind you if you lose 50% on a position, to get back to zero you require a 100% return.

Index funds are useful and paying extravagant fees is not helpful. However, throughout my career what I have found most important is don’t lose money ever.

During booming market cycles it can be frustrating to feel you are not flying the kite high enough.

No. Be patient. Do not lose money.

Here’s why:

  • Suppose you invest $100.
  • A 50% loss means you’re left with $50.
  • To get back to $100, you need to double that $50.
  • A 100% gain on $50 is $50, bringing you back to $100.

-Zac