Percentage ReturnsInvestment Technique
Investment gains and losses are based on percentage returns. Most people think this is obvious, but do not realize the relationship between percentages and the result on their money. Due to basic math, losses are far costlier than gains are beneficial. It is harder to replace lost capital than earn capital in percentage terms.
As an example, if you had $100, and you lose 20% of your investment, you’ll have $80. However, to return to your original $100, you must acquire a 25% return on $80. You must cover an extra 5% return, just to break even with where you originally were. This can be very difficult in the stock market, where annual returns for an investor range from 8% to 12% annually depending on performance. If you earned a respectable 12% return, it would still take you two years just to return to where you started.
The primary point of this example is to show that the chief goal of investing is capital protection first. The most basic rule is: Don’t lose money. If you are losing principal, it is better to get out early than to continue bleeding small percentages of money waiting for a turnaround. Losses are accelerated compared to gains. If you are investing, use market orders such as a stop loss to protect yourself and limit your loss to a certain percentage.
Your very approach to investing should also limit your loss. Using a valuation based system that picks investments based on risk and potential percentage returns (while buying in relation to price) reduce the possibility of loss. It prevents you from moving money into investments that are likely to suffer losses while maximizing the possibility of acquiring gains.
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International Economic Analysis:
- Major Currency Economic Summaries
- Performance of Major Imports and Exports
- Mandates of Central Banks versus Expectations
- Performance Indexes of Major Economies
- Economically Correlated Currency Projections
- Large Funds Currency Sentiment Readings
- List of Technical Indicators to Look For
- Occasional: Foregin Exchange Technicals Markups
American Markets Analysis:
- Summaries of American Economic Structure
- Performance of Major
- Federal Reserve Mandate versus Expectations
- Performance Indexes of U.S Economy
- Economically Correlated U.S Dollar Projections
- Large Trading Fund Index Sentiment Readings
- Market Wide Earnings Versus Valuations
- Fundamental Ranking of U.S Business Sectors
- Best and Worst Future Consensus Estimates
- Occasional: Firm Fundamental Strength Report
- List of Technicals to Look for While Trading
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