Hands up for those of you during your bei kambing days, honestly thought if we had a -50% loss on a stock position or at portfolio level, all we need is just a 50% gain to breakeven?
Math is hard right?
For those of you whose math is like mine, here's the shortcut above.
Actually, just memorise two will do:
1) - 20% need + 25% to breakeven...
2) - 50% need + 100% to breakeven!
Let our track records do the talking.
If you have lots of 2 baggers in your portfolio, then you've earned the right to tell others that if we can't stomach a -50% loss, we should never be in the stock market.
Alternatively, if you have a history of making lots of 25% gains, then you'll be comfortable with any plain vanilla -20% bear markets. They don't phase you.
All of us have our "uncle point".
That's the capitulation point where we just can't stand the pain anymore and just throw the baby out with the bath water!!!
I've discovered my "uncle point" through crash got sound....
The trick is to get out way before we reach that point.
Smol,
ReplyDeleteFor those who can't stomach a -50% drawdown, no need to swear off stocks (or cryptos). Just make sure they don't comprise all or most of your liquid assets. ;)
Trick is not to be on the same road as your uncle point.
Useful for many who find it hard to cut loss or execute trailing stops, even when they are still in the black.
E.g. "Alamak, my $100K paper profits now only $60K ... should have sold last month! Nevermind, there should be a short-term bounce soon ... I'll sell when my profits get back to $80K!"
Spur,
DeleteHow I let a profitable position turned into a loss?
I'll sell when my profits get back to $80K...
While I wait and hope, my unrealised profits tanked further to now $30K :(
If I not going to sell with $60K profit, I'll never sell with $30K profit!
Before long, I'll join the I'll breakeven one day club...
Well, I'm a LONG TERM "investor" mah!