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"The market is not your mother. It consists of tough men and women who look for ways to take money away from you instead of pouring milk into your mouth." - Dr. Alexander Elder

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Tuesday, 3 November 2009

The Cruel Math of Big Losses

If your stock price declines 10%, it takes about an 11% gain in stock price to break even.

If the drop in stock price  is 20%, you need a 25% gain to recover.

A fall of one-third requires a rebound of 50%.

And if your stock price falls by 50%, "you need a double," or a 100% rise.

Can you see how cruel Math of Big losses?

So ask yourself how often and how long will the stock price take to double?

You will feel the pain and agony of sitting on big losses even it is just paper losses. See the table below for how much gain in stock price will it take to recover?

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