Mathematics is used in some form every day in life. While some people are very good at math, in the investment world mathematics can be very confusing and can trip up even the brightest minds.
So, when it comes to the mathematics of investing, do you get it?
Unfortunately, the lack of knowledge or misunderstanding of how math works in investing can be very costly. According to several financial analysts and researchers, many people spend the majority of their time recovering from cyclical downturns in the market. Can you believe that some investors spend a good amount of their time just trying to get back to even from the previous downturns?
The reason and answer as to why it is this way is the unforgiving mathematics of loss. When investments lose ground, they must make up more ground, percentage-wise, just to get back to even. For example, if you have a $100,000 portfolio that loses 50%, you are down to $50,000. You now have to earn 100% just to get back to even!
The mathematics of loss in investing is so cruel because losses count so much more than gains and because it usually takes so long to make up those losses. And this is why proper risk management and active investing is critically important in investing if you want the magical powers of compounding interest to work for you over time.
To learn more about the mathematics of loss in investing, and how to properly invest in today’s volatile and ever changing economy for taking advantage of compounding interest, feel free to contact me at (702) 462-7233 or agoodman@AskAdamGoodman.com
Investment Advisory Services offered through Brookstone Capital Management LLC, a Registered Investment Advisor. Investments and/or investment strategies involve risk including the possible loss of principal. There is no assurance that any investment strategy will achieve its objectives. This information is not intended to be used as the sole basis for financial decisions, nor should it be construed as advice designed to meet the particular needs of an individual’s situation. Content is provided by third parties for informational purposes only and is not a solicitation to buy or sell any products mentioned.