Ms. Smarty Pants Know It All

Today, October 13, the stock market went on its largest one-day rebound since The Great Depression. My total holdings went up over 10%. I have no idea what tomorrow will bring, but I’m glad I’m not smart/stupid enough to try to time the market.

After all that we’ve been through, it sure feels nice to see only one red item on the screen today.

But as I’ve learned from Ms. Suzy Orman, the actual dollar amounts are misleading. You’ll always have to gain back more than you’ve lost. For example, if a portfolio valued at $10,000 drops 10%, that portfolio loses $1,000. Now that portfolio is worth $9,000.

To gain back that original $1,000, the portfolio must rise by at least 11%. It’s always harder getting back to zero.

Now that I have this one-day surge in my back pocket, I thought I’d take a look and see how I’ve faired in this topsy-turvy economic whirlwind. (so far)

I’ll set my portfolio value in May as the starting point. Let’s see now … [pulls out statements] … if May is … then [calculate, calculate] … ok, numbers …

Alright, here we go. By July, it dropped 6.5%. Acceptable. By September, it fell 12.9% from that May total.

But October is where it really hurt. As of today, even with the market bounce, I’m 29.1% down. To gain it all back, my portfolio is going to have to increase by 41%.

Wow. This is the first time I’ve actually crunched my numbers. This news is very depressing.

I’m so glad I’m still relatively young and have been practicing good money techniques for a while now. If I didn’t try to diversify, have a healthy emergency fund, live debt free, and get a mortgage I could afford, I’m sure I would be panicking way more than I am now.

Do you have any blood-curdling pre-Halloween financial tales to tell?

Tags: Life, Money //