As investors age they are less able to recover from significant investment losses. The table below shows how important it is to focus on avoiding investment losses, as the gain required to recover from the loss is exponential; similarly a relatively small loss can easily erase big gains.
Recouping Investment Losses
Research conducted by Welton Investment Corporation over a fifty-year timeframe from 1960 -2010 found that, whilst many investors assume equity market returns have a normal distribution curve (bell-shaped) over time, the reality was that returns are asymmetrically weighted on the downside rather than the upside.
Welton's analysis suggests that the average investor encountered severe rolling quarterly losses 5.3 times more frequently than would have been expected.
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