Unrealized Lost/Gain Math

[XAMOTOMAX]

Hmmm, not sure what that opportunity would look like? Are you of the opinion that the market is headed for further declines? If so, now is the time and better than tomorrow or later. Why wait to go to G on a bounce if that bounce is still lower than we are right now because of additional declines between now and then? If you think the market is going to reverse and head back north, then yes, you stay put but if you think it's going down more, especially now with the end of the month here and fresh IFT's coming day after tomorrow, I can't really see a reason why you would wait. Can you elaborate?

[rcozby]

It’s the classic opportunity cost thing. If you go down, and then eventually go back up to “break even”, then you’re still behind because the time value of money has changed. You have to take inflation into account. Which means that you have to go up even more to really break even.

[spooner4]

Its is easy to explain. 1% X $100,000 = $1000. $100,000 - $1000 = $99,000. Next gain 1% X $99,000 = $990. Next $99,000 + $990 = $99990. Your gain is based on $99,000 not $100,000.

[jlozano042]

... Today's market is not looking good and I might make that move today....

Well ... I stand corrected!

[ArrieS]

4 - It's all digital, therefore....

[Octjan2]

Its is easy to explain. 1% X $100,000 = $1000. $100,000 - $1000 = $99,000. Next gain 1% X $99,000 = $990. Next $99,000 + $990 = $99990. Your gain is based on $99,000 not $100,000.

That is why you buy back in at the same share price or Index price. Ignore the % loss/gain. If I bought the DWCPF at 1409 and don’t sell until I at least reach that level again I didn’t lose anything.

[Aitrus]

You lost $10, but since you use CAGR in your own personal calculations you realize that you didn't really gain 1%. Rather, your CAGR over those two days is -0.01% so you're not really blindsided. You document the day's numbers in your tracking spreadsheet. Since your time horizon is measured in years and decades, you decide not to worry about it because you have other things to worry about, to experience, and enjoy that are more meaningful in your life. You trust the market, and your strategy, to do it's thing, and you keep investing for the long haul.

[Tomanyiron]

... so you're not really blindsided...

And less will be now. Thanks Aitrus,
I had been seeing statements similar to Option #1 (-1% one day, +1%, so you are back to where you were).
And I understand your effort to reduce fear. "Fear and greed are the main motives behind the stock market’s ups and downs. Theses emotions control the masses. Don't allow them to control you. Have a strategy that works over time and is designed to minimize risk. The moment you deviate from that strategy, you become one of the emotional masses."

On the other side, some strategies were saying to sell after a predestinated % loss. But pride and possible embarrassment (two other emotions) were preventing the acceptance of "this one I didn't get" and a timely exit.

[john929rr]

The name for this is Beta...it is what makes investing in long or short multiple indexes or a derivative like the VIX so dangerous. You have to be right on the money.

[tcatlin]

... so you're not really blindsided...

And less will be now. Thanks Aitrus,

And I understand your effort to reduce fear. "Fear and greed are the main motives behind the stock market’s ups and downs. Theses emotions control the masses. Don't allow them to control you. Have a strategy that works over time and is designed to minimize risk. The moment you deviate from that strategy, you become one of the emotional masses."

On the other side, some strategies were saying to sell after a predestinated % loss. But pride and possible embarrassment (two other emotions) were preventing the acceptance of "this one I didn't get" and a timely exit.

This reminds me of the Buddhist teachings of the 8 worldly winds or sometimes called the 8 worldly concerns. It says we are always avoiding one of the pairs while seeking the other: gain and loss, praise and blame, good reputation and bad reputation, and pleasure and pain.

"We might feel that somehow we should try to eradicate these feelings of pleasure and pain, loss and gain, praise and blame, fame and disgrace. A more practical approach would be to get to know them, see how they hook us, see how they color our perception of reality, see how they aren’t all that solid. Then the Eight Worldly Dharmas become the means for growing wiser, as well as kinder and more content." -Pema Chodron

[Tomanyiron]

I thought this might be a good time to bump this thread.