Why is it so important to avoid prolonged market downturns?
There is an asymmetrical quality to investment returns. Did you know that if your investments lose 25% of their value it takes a 33% increase in their value just for you to “break even”? Too many investors are focused on capturing market “upturns” without realizing the tremendous damage a prolonged “downturn” can do to your portfolio. Also, as we mention in other questions here, we all experience human emotions. It’s difficult for us as investors to live through prolonged market downturns (as in 2000-2002) without feeling nervous or impatient. These feelings can cause investors to make poor or irrational choices.
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- Why is it so important to avoid prolonged market downturns?
