The importance of protecting the principal
The relationship between loss and the increase required to recover the principal is as follows:
A loss of 10% requires an increase of 11.11% to recover the principal
A loss of 20% requires an increase of 25% to recover the principal
A loss of 30% requires an increase of 42.86% to recover the principal
A loss of 40% requires an increase of 66.67% to recover the principal
A loss of 50% requires an increase of 100%, that is, doubled, to recover the principal
A loss of 60% requires an increase of 166.67% to recover the principal
A loss of 70% requires an increase of 233.33% to recover the principal
A loss of 80% requires an increase of 400% to recover the principal
This data clearly tells us that as the loss ratio increases, the required increase in order to return to the initial investment level will also rise sharply.
Therefore, in the investment process, the importance of protecting the principal is self-evident.
Investors should always put risk control first and reduce risks and ensure the safety of principal through reasonable asset allocation, diversified investment, regular evaluation and adjustment of strategies.
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