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Chart of the Day: Recovering from Losses is Hard

Crews Bank & Trust Wealth Management Services Jun 25, 2024
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.

Contents

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.
Chart of the Day

About the Author

Crews Bank & Trust Wealth Management Services
Crews Bank & Trust Wealth Management Services

Experienced professionals from our wealth management services team can help you achieve a bright financial future through investment strategies tailored to you. We’ll show you all of the options available and help you choose the ones best suited to you. We’ll provide high-quality, personal service as we work toward your goals together. Our Portfolio Managers do not receive commissions on trades; our recommendations of investments are based solely on your best interests.

Investments are not a deposit or other obligation of, or guaranteed by, the bank, are not FDIC insured, not insured by any federal government agency, and are subject to investment risks, including possible loss of principal.

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