Monday, April 6, 2009

The Financial Plan - Why it is Important to Limit Loss

The Pain to Gain Ratio

If you lose 5% of your portfolio, it takes a gain of 5.3% to get back to even.
If you lose 20% of your portfolio, it takes a gain of 25% to get back to even.
If you lose 50% of your portfolio, it takes a gain of 100% to get back to even.
If you lose 90% of your portfolio, it takes a gain of 900% to get back to even.

Conclusion: If you limit your losses, the road back to prosperity is much easier. Work with your financial advisor to develop an investment strategy that appropriately reflects your individual risk tolerance.

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