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OleDrippy (42.64)

It just dawned on me....

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February 24, 2009 – Comments (3) | RELATED TICKERS: SPY , EFA , EEM

If you are an average investor and lost 50% in this market downturn (and many lost more than that), it is going to take A LONG TIME to get back to even.

For example - and please correct my math if you find error - If you started with 100K and now find yourself sitting on 50K, at 6% it will take you 11.9 YEARS JUST TO BREAK EVEN.. That really sucks hard. And anyone who tells me I can expect to earn 10% over the next 12 years can pack sand.. That's what they told me in 1997, which is right where we are right now.

3 Comments – Post Your Own

#1) On February 24, 2009 at 11:41 AM, BradAllenton (38.65) wrote:

You just nailed one of my most common arguments against static investing. Losses are far more damaging than gains are constructive. To get back that 50% you are talking about, your portfolio would have to go up 100%. You would be surprised how few people seem to understand that simple math.

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#2) On February 24, 2009 at 12:38 PM, Schmacko (96.90) wrote:

This is why I ended up selling what was left of my position in Transocean.  I had an average cost basis in the $130 range dumped two thirds of my position when it dropped below $100 but held the last third on the hopes it would rebound and I could recoup some of my losses.... i don't think many people were really expecting the $140 --> sub $40 fall in oil.  When Rigs price finally got back above $60 a few weeks ago I sold the rest of my position, not because I don't think RIG is a good long term play but I don't see it doubling again anytime soon and it's not a dividend payer.

If you sold off weak postions when things started getting bad and used the raised cash to dollar cost average/or start new positons into relatively "safe" dividend paying stocks you'll probably do better than just waiting for your stock that's lost half it's value to double again.

Other than that short term trading seems to be the way to play the volatility.

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#3) On February 24, 2009 at 5:40 PM, OleDrippy (42.64) wrote:

I believe it was Everydayinvestor that said, "Funny how everyone is buy-and-hold when the market is up and a trader when the market is down"... There is a lot of truth to that!

I also understand that the years following a vicious downturn tend to be the biggest nominal gainers. For some reason, though, I feel it will not be the same this time. We have allowed our government to encumber our system to such a degree that there just won't be enough capital to create the growth we need. JMHO.

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