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Chart of the Day: Recovering from Losses is Hard

 Green (required gain) and gray (loss) bar graph, illustrating how one needs a 100% gain to recover from a 50% loss in the stock markets

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Today’s Chart of the Day is from Compounding Quality (Compounding Quality (@QCompounding) / X) and shows the percentage gain needed to recover from a loss. Quite simply, you need a 100% gain to recover from a 50% loss. For example, a 50% loss on $100 leaves you with $50. To get back to $100, you need a 100% return. This demonstrates the great Warren Buffet’s adage, “The first rule of an investment is don’t lose [money]….”
 
Now, for context, fluctuations in price are one thing. Here, I am talking about irrecoverable losses such as buying a stock and having it go down 50%, never to return to the previous price. This why advisors are often wary of riskier types of investments.

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