The Difficulties of a Diversified Portfolio:
An Investment Loss Calculator

It’s been nearly a year since the beginning of the pandemic, when the stock market saw extreme volatility during the shortest bear market in history. In February and March of 2020, the S&P 500 Index returned -19.57%, but since April 1, 2020, the S&P 500 Index has returned 49.79%*. And with that incredible rebound we have a fading memory of what volatility can do to a portfolio, which has made it increasingly difficult to maintain a diversified portfolio.

We’ve heard from advisors that the diversified portfolios they’ve established for their clients’ long-term goals are constantly being challenged—especially as the stock market continues higher—creating risk. In fact, many investors, especially those nearing retirement, fail to realize that in a downturn, it’s not only about the sudden loss of monetary resources, but also the amount of time needed to regain the portfolio’s value that becomes a concern. In short, it could mean delaying retirement and working a few more years to restore a retirement nest egg.

To help investors understand what an unexpected market drop could mean to their portfolio value—and how much time may be needed to get back to even—we’ve created an Investment Loss Calculator.

The calculator allows you to insert the starting portfolio value, percentage decline in the market, and then an average annual return assumption going forward. The calculator will then display the projected amount of money lost, and an estimate of the years needed to get the portfolio back to even.

 

For instance, if the market drops 20%, investors will need the market to return 11% annually for approximately two years for their assets to return to their pre-drop level.

Investors, and especially those nearing retirement, should be assessing the risks in their portfolios now, before the next downturn begins, and explore strategies that provide true portfolio diversification and hedge equity market risk.

Try out our Investment Loss Calculator Tool >