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Old 02-24-2021, 08:44 PM
roper1 roper1 is offline
Join Date: Aug 2012
Location: Strathmore
Posts: 4,835

Originally Posted by Maxwell78 View Post
The chart youíre looking at is the calendar year returns on the S&P 500 going back to 1980. Thereís a lot of data here, so letís just deal with the far left-hand side for example, 1980. In the calendar year 1980, the stock market went up 26%. Pretty good year. But what that red dot is showing is the inter-year decline of 17%. So think about what happened here. As the market begins a new year in 1980 obviously, it must have started to accelerate to the positive, and it goes up for a while. And then it rolls over, starts to go down, and everybody has a different threshold of pain, and it goes down 5, 6, 7%, and all of a sudden, weíre reading about Brexit or default or fiscal cliffs, and we become concerned. At some point as it goes down to, letís say, 12, 13%, we believe that we should extricate ourselves from the market. This is fun with math only, but on that red dot, down 17%, if you got out of the market on that day, your cost of opportunity was 40%, because if you put a dollar in on that day, you got a 40% return. Thatís how you win. You cannot achieve your long-term goals in the stock market by consistently crystallizing losses every time it goes down.

The important thing to note on this chart is those red dots, that every year without exception, at some point during the year, there is a negative rate of return achieved. Itís how you deal with that event that will determine how financially successful you are over time.

Just some food for thought. It's what i live by

Take care everyone
I hope the OP takes the time to read this & understand it. I started investing in my 20's because my workplace had a 'voluntary' matching RRSP. It was voluntary but there was a lot of pressure to join.

Totally young & naive, I was lucky enough to get some decent returns early, back when you got a paper statement quarterly. I was naive yes, but I could read, & I could see the numbers getting larger through growth, despite bigass recessions & downturns.
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