Alright, let’s get back to basics.
If I lose money in my investments, how much do I need to make back? If I lose 10%, does my investment need to go up by 10% to get back to where I was? Let’s have a look at this example:
You invest $10,000 in the share market. The market falls by 10%. Your current investment is now only $9,000. To get back to where you started, you need to make $1,000 right? So:
$1,000/$9,000 = 0.1111 = 11.11%
In other words, you actually need to make 11.11% to get back to where you started.
Have a look at another example:
The stock market had a horrible crash. Your investment of $10,000 has halved (50% decline). It is now $5,000. Thus, you need to make $5,000 from that investment to get back to where you started. So:
$5,000/$5,000 = 1 = 100%
In other words, if your investment declines by 50%, you then need to make a 100% return to get back to where you started.
I’ve done the calculations below to determine how much you need to make, percentage-wise, if your investment declines by a certain amount. Get your calculators and try it out.
You lost 10% = You need to make 11.11%
You lost 20% = You need to make 25%
You lost 30% = You need to make 42.86%
You lost 40% = You need to make 66.67%
You lost 50% = You need to make 100%
You lost 70% = You need to make 233%
You lost 90% = You need to make 900%
You lost 100% = Your capital is gone!
You lost 120% = You now owe money 🙁
