"We believe investors are somewhat immune to percentages.Thirty-two percent doesn't have the same impact for someone who has $100,000 as if you said that now they only have $68,000."He's right, at least in my case. The other day I noticed a listing of the worst bear markets in a Merrill Anderson newsletter. The most devastating, of course, was September '29 - June '32. The value of the S&P 500 dropped 86%.
But that plunge was followed by a 57-month bull market in which the S&P climbed a stupendous 324%. Gee, maybe that bad old Depression wasn't so bad after all.
But it was, measured by dollars. An investor with $1 million in stocks in September '29 had only $140,000 left in June '32. And that "stupendous," 324% recovery only brought the value of his battered portfolio back to $593,600.
Moral: Use dollars to help investors assess risk. Use percentages when they need panic relief.
No comments:
Post a Comment