Market Loss

It Costs More Than You Realize

The True Cost of Market Loss

Wall Street does a great job of convincing people that risking money in the stock market is the best way to grow wealth. Ever heard this piece of Wall Street doctrine: “when you are young you can afford to take losses, because you have time to recover?”

Would it surprise you to learn that this advice may not be in your best interest?

Wall Street’s influence is so powerful that if they repeat the same doctrine over and over again, people eventually believe it’s fact. Losses are never good, but they can be
especially costly the younger you are because of the opportunity cost. You lose the ability to have that money working for you for the rest of your life. Ouch!

Take a look at the true cost of a $50,000 stock market loss (hint: it’s not just $50,000). Let’s say you lose $50,000 in a market down term when you are 45 years old. Let’s also assume that you could have averaged 7% percent over the next 20 years (which you may be able to do with our strategies). How much would this $50,000 loss cost you by the time you retire at 65? The true cost of the $50,000 loss is $193,484. But that’s not where it ends. Let’s assume you live to age 85. That $50,000 loss actually cost you $740,722. Your loss didn’t just cost you $50,000, it really cost you 3/4 of a million dollars!

Are You Being Misled?

“Don’t sell! Be patient and your money will come back.”

Wall Street promotes the idea that after market crashes, if you just hold on, you will eventually “recover “ your losses and that the money you lost will come back into your account.

Surprise: Another Wall Street misconception.

When you have a loss in the stock market that money is gone. And it’s not coming back. If your account does recover to the amount before the loss, it happens because the principle left in your account grew enough to replace the amount lost.

Wall Street doesn’t put a deposit back into your account. Recovering significant losses can take anywhere from 2 to 6 years on aver-age (Source: back to even is better than continuous losses, but the real question is how much more money would you have today if you hadn’t lost the initial principle in the first place!? (Keep in mind, people often continue contributing to their accounts during the “recovery” period. They mistakenly think that they have recovered their losses, when they, themselves, have contributed substantially to the recovery).

Rule Number 1: Never lose money.

Rule Number 2: Never forget Rule Number 1.

- Warren Buffet

Take the Retirement Readiness Quiz

If you are thinking about and planning for retirement, then you are already taking a step in the right direction. However, there are many factors to consider and this quiz will provide a current and realistic summary of where you are versus where you want to be in terms of retirement readiness.