The Importance of Limiting Losses

The Gain Required to Recover from a Loss

Millions of people were headed for retirement with heavy equity concentrations in 2008 when the Dow began its fall, ultimately losing nearly 54 percent over 16 months. With only a limited amount of time to save for retirement, most investors can’t wait for the “average” return of equities to make them whole after a market downturn and are surprised by how much gain is required to offset loses. For instance, while a 10% loss only requires an 11% gain, a 30% loss requires a 43% gain and a 50% loss (similar to what occured during The Great Financial Crisis) requires a 100% gain just to even—back to where you were pre-loss.

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