Losing 10% of your net worth
No, that person wasn't me! ACCICB told me he heard of somebody who lost that much last year in the stock market. Regardless of how much the person's net worth was, 10% is a huge amount to lose in a year! I was asked to guess the dollar value of the person's loss and even after 10 guesses, I still didn't hit the magic number!
Let's just say that it is impossible for most people to have that kind of money in a lifetime and the amount lost can feed 10 families comfortably throughout their existence on earth. That conversation triggered off this post as most people have probably already calculated their realised /& unrealised portfolio loss/ net worth loss now that we are in the early days of 2016.
Since investing typically means waiting for the value of a stock to appreciate, in such economic doldrums, valuations get slashed and usually so does dividends. I can't help but wonder with the changing nature of the world, valuations would be calculated differently and even if the global economy gets nursed back to health, the formula for success would no longer be the same.
We may never see the kind of valuations for the stocks we hold in our portfolio or we may see them but that could be years later, nobody knows for sure but the red ink in your portfolio is something staring at you everyday. It could take years of dividends to offset the drop in valuations for some stocks and I would be so grateful if the valuations would recover in my lifetime.
I was cutting stocks last year during the dead cat bounce whereas everyone else was accumulating with the notion that the market has recovered. I was delighted that I had the chance to escape as I had and still have the view that 2016 would most likely be more of 2015 but a tinge more bearish. I have to be more careful with any investments that I make this year but I'll likely be spending most of my time on trading.