On... the Fear of Negatives
I shared my Quarterly Performance with a friend recently and he came back with the response “Why are there so many negatives ?”. That may be a polite way of saying - your result is quite poor. Its definitely better to have all positive returns and no negatives, but in the stock market, not only is that near impossible but it might not actually matter too much. If ( and that’s a big IF ), you had good portfolio/capital allocation, the negative return on single stocks don’t really matter much . Lets have a look at 3 hypothetical scenarios. Each scenario has a total investment of $100 split over 5 stocks - A, B, C, D and E, with different P/L ( profit/loss ) and portfolio allocation. Scenario 1 - each stock in the portfolio has a 10% return Scenario 2 - stock A has 30% returns but the rest have negative 50% returns Scenario 3 - stock A has negative 30% returns but the rest have 50% returns Which scenario as an investor would you like your portfol...