Bear markets can be very frightening. They can cause stocks to drop by 40% to 60% and stay there for a fairly long period of time. It can be quite stressful to go through a bear market, especially for young investors. However, it is helpful to look at the big picture, which is this: even though the prevailing bear market might look very frightening, most young investors are still working, and there are 20 to 30 years of income still to be earned. If you include these unearned income in your total wealth, you will find that the prevailing bear market actually only eats up a small fraction of your total wealth. Let us consider the following example.
| Starting Salary |
$ 3,000 |
| Annual Salary Growth |
5% |
| Salary Ceiling |
$ 10,000 |
| Investment Allocation |
10% |
| Asset Returns |
7% |
| Max. Drawdown |
50% |
A fresh graduate aged 25 is ......
