yes, generally it’s l/(1-l), where l is the loss (ranging from 0 to 1).
Example: if you loose 10%, your portfolio needs to grow 11.11% to compensate just for the loss. go figure how long that is gonna take
it kind of depends on what you did with that money. There is an opportunity cost there.
I used my 401k to start a company. so far that’s performing well above the market (and continuing to. It’s a second job so I’m reinvesting that with annual contribution caps, etc.)
I’m glad that’s worked well for you! For the overwhelming majority, keeping their money in the 401k and continuing to make regular contributions, regardless of market volatility, is the wisest course of action.
correct me if I’m wrong here, but that 11%, to roll with your example, would need to be recovered immediately for that math. Like every month it doesn’t go back up… that’s compounding the lost opportunity. And if 2008 is anything to go by… it’s not just going to go back up, it’s going to take time.
like, if you expect a certain amount of growth, it’s unlikely you’ll get the 11% plus that “normal” growth back.
It is even worse if you are at the withdraw stage of life (generally retirement) because liquidated shares cannot participate in any later market increase.
yes, generally it’s l/(1-l), where l is the loss (ranging from 0 to 1). Example: if you loose 10%, your portfolio needs to grow 11.11% to compensate just for the loss. go figure how long that is gonna take
Historically, what, 4 years or so?
If you pulled all your money out in 2009 you were fucked. But by 2013 things were fine again.
https://fourpillarfreedom.com/heres-how-long-the-stock-market-has-historically-taken-to-recover-from-drops/
it kind of depends on what you did with that money. There is an opportunity cost there.
I used my 401k to start a company. so far that’s performing well above the market (and continuing to. It’s a second job so I’m reinvesting that with annual contribution caps, etc.)
The existence of exceptions does not invalidate a general rule.
I’m glad that’s worked well for you! For the overwhelming majority, keeping their money in the 401k and continuing to make regular contributions, regardless of market volatility, is the wisest course of action.
correct me if I’m wrong here, but that 11%, to roll with your example, would need to be recovered immediately for that math. Like every month it doesn’t go back up… that’s compounding the lost opportunity. And if 2008 is anything to go by… it’s not just going to go back up, it’s going to take time.
like, if you expect a certain amount of growth, it’s unlikely you’ll get the 11% plus that “normal” growth back.
It is even worse if you are at the withdraw stage of life (generally retirement) because liquidated shares cannot participate in any later market increase.
You shouldn’t be invested that heavily in stocks at that age though.
Lots of people paying for that mistake today.