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Untitled

Finance - How Important Is It Not to Lose?
Test your knowledge:

Donna's IRA value is $100,000 and is in the market.  The market goes down 25% that year and her account is now $75,000.   

What percent does Donna need to earn next year to recoup the $25,000 lost?

Place your mouse here to see the answer.
Trading a few points to eliminate all market risk
Consider two accounts starting at $100,000.  The first account is susceptible to market downturns.  The second account has no market risk - it earns 0% interest during down market years.  When Account 1 increases 10%, Account 2 will only earn 8%.

  Account 1 Value  
 $100,000
 $110,000  (+10%)
 $ 88,000   ( -20%)
 $ 96,600   (+10%)

Year
0
1
2
3

  Account 2 Value   
 $100,000
 $108,000   (+8%)
 $108,000   (-0%)
 $116,640   (+8%)
Even if Account 2 earns only 5% both years, Account 2 still yields $110,250 after the 3rd year. Compare that to Account 1 which sits at $96,600 after the 3rd year.

Would trading a few percentages in gains to eliminate all downside market risk be better for your accounts than where they are now?


If you have questions or would like to learn more, please call (480) 229-6220 or send a message by clicking the email address above.
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