On... Making Mistakes
Nobody likes making mistakes, but it is inevitable especially in the world of investing . In a Coffee Can investing forum, Tom Gayner said mistakes become less important with time ( something along that line ). That got me thinking, and I created a scenario to have a look. The scenario is as follows:- You invested 20,000$ and split it into 10 stocks. ( 2,000$ per stock ) After the first year, 6 of those stocks ( 12,000$ ) went to zero ( in reality, this would not happen even if you try ) ! You just lost 60% of your portfolio value in a year. Investing is terrible?! However, let’s look at what happens with the passage of time, assuming your remaining 4 stocks generate an annual return of 10% each. After the 1st year, your portfolio lost 60% of its value and it takes you 10 years to return to your initial invested amount of 20,000$. In 20 years, you would have increased the investment to 53,000$. That ’s a gain of 169% with a total portfolio ...