Do you understand what 10% return over 10 years means? How can it possibly take 10 years to recover in my hypothetical example? Standard covention would take 10% return over 10 years to be returns smoothe out over a 10 year period to be 10% each year.
Allow me to help you with the math. 10% per annum return is 1.1^10 = 2.59. therefore if started year 1 with $1m then year 10 you would have $2.6m. If after year 3 your $1m (now $1.3m) dropped to $600k you would need $2m over 7 years to maintain your 10% over 10 year return. Therefore the next 7 years returns would need to average 19% pa to achieve goal of 10% compounded per annum. Not impossible.
So my point was not take 10 years to get capital back. The point is equity ebbs and flows when investing and a huge loss in one year will pale into insignificance if stick (or amend the plan) to achieve 10% compounded (or any other arbitrary figure)
Peter Lynch famously said if get 60% of trades as winning trades over the long term then you are doing well - provided winners are of a magnitude greater than losses. Risk management.
Losses should be welcomed it proves the plan is working - provided you have a plan
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