Quote:
Originally Posted by rustyp
From the same article - "Retirees have less time to recover from bad investment moves than younger workers. Their portfolio could be even more at risk if they hold on too long in a prolonged decline.s. "
A 50% drop in the market takes a 100% rise to make it back to breakeven. For most seniors it takes more than 100% due to the fact they are making monthly withdrawals to live thus the base is smaller than when the market went down. Sleep tight.
|
Many people do not understand math.
If, you invest 10,000 and the first year you make 10%. The next year you loose 10% many people THINK they have now 10,000
10,000+10%=11,000 11,000-10%=9900. To get the claimed LONG TERM gain of 8% per year you would have to get 10,000+8%=10,800+8%=11664 11664+8%=12597.12.
Since your second year, you lost $100 you only have 9900 you need to make 27% the third year to be getting the quoted 8% per year.
Most of the information WE read is written by people SELLING investments. We read about the magic of compounding. MY POINT is to remind ourselves that it cuts both ways.