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If you make 50% one year and lose 50% the next, you haven’t broken even. You are behind 25%. Here
is an example:
Invest $1000, earn 50%, you now have $1,500
Lose 50% of your $1,500, you are down to $750.
This is because the 50% you lost was half of $1,500, and the 50% you made was half of just the
original $1,000.
In a similar way, if you lose 50%, you’ll have to gain 100% just to get back even.
This is the brutal math of investing. The percent of your gains can be wiped out by a smaller
percentage loss.
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