In this continuation of calculating equity return, let's simulate a scenario that on certain years we have very good returns. And we feel rich that during that periods, mentally we think we can afford to lose. This can be at portfolio level or Individual Stock that we have grown to love.
As the table above, I picked year 2009 and 2012 where Cory has strong gains and have them tweaked about 50% lower returns as we are less careful with money and that we have fallen into a tunnel vision of justifying more risk on just one or two stocks which have been been a key lifter of the entire portfolio.
This is not unrealistic. Is quite common we see at portfolio level we are doing well just because of a few of them or maybe even just one counter. And if that one is soured later on, we like to know the impact.
From the table we can see Annualised returns reduced to 4.2%. And for the above example is a $61, 000 hits on return of $100, 000 investment. Do remember return on such over 10 years compounded is quite significant even for just 1% point.
The next time you feel a particular stock has gained 100% return for you that you can afford to lose them back since at counter level you will not lose, better think again.
Have a nice day.
Cory
20160918
As the table above, I picked year 2009 and 2012 where Cory has strong gains and have them tweaked about 50% lower returns as we are less careful with money and that we have fallen into a tunnel vision of justifying more risk on just one or two stocks which have been been a key lifter of the entire portfolio.
This is not unrealistic. Is quite common we see at portfolio level we are doing well just because of a few of them or maybe even just one counter. And if that one is soured later on, we like to know the impact.
From the table we can see Annualised returns reduced to 4.2%. And for the above example is a $61, 000 hits on return of $100, 000 investment. Do remember return on such over 10 years compounded is quite significant even for just 1% point.
The next time you feel a particular stock has gained 100% return for you that you can afford to lose them back since at counter level you will not lose, better think again.
Have a nice day.
Cory
20160918
Are you sitting beside a blank paper or an empty screen, with the cursor blinking, wondering how to start writing your thesis or dissertation? See more accounting homework help
ReplyDeleteDo you need a loan to pay off your bill or in need of financial help with a loan you can contact us now for a loan if you are serious in getting it surely we will help you out via Email {urgentloan22@gmail.com}
ReplyDelete