- Most people consciously overestimate the percentage figure for the possible loss in investment value that is acceptable to them.
- at the same time they subconsciously underestimate the absolute value that their selected percentage figure will represent in an actual investment portfolio.
Before getting into the details of bear market mathematics, I want you to ask yourself a question: “How much downside are you capable of experiencing in an investment (as a percentage) before you will panic and sell everything?”
Go ahead – give it a few seconds of thought! ( and be honest to yourself! no one is listening)
In my experience two things usually happen whenever I have asked this question