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Many people tend to think that return is proportional to higher risk.
However, risk and return are not a simple 称metry.
Large losses take time to recover and have a strong impact on emotional aspects.
In this article, we will organize why the loss is heavy and how to manage risks in practice.
Loss is heavy even in the same proportion
In conclusion, the negative impact of investment will be greater than you can imagine.
For example:
- 50% increase → assets 1. 5 times
- 50% fall → half of assets
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This is a condition to restore after the fall.
100% profit is required to return to the original 1 million yen if it becomes 500,000 yen.
In other words, the assets below 50% will not be returned to the original.
A対metry of Loss Recovery
The lower drop rate and the profits required to restore will change as follows:
| Drop rate | Profits needed to be restored |
|---|---|
| 10% | Approx. 11% |
| 20% | 25% |
| 30% | about 43% |
| 50% | 100% |
| 80% | 400% |
This is the essence of investment.
The greater the loss, the greater the need for recovery, the greater the return.
That’s why it’s important not to lose much more than to win big.
Mathematically Losses
In asset management, compound interest is important.
In a word, it is a mechanism that makes profit.
However, big loss breaks the利.
For example, consider the following value movement:
- Year: +20%
- Second year: -20%
At first g, it seems to be offset, but it is actually not offset.
100 × 1.2 × 0.8 = 96Result is 96.
4% decrease
This is an easy-to-understand point for beginners.
Even in the same proportion of plus and minus, the impact on the asset is not the same.
Human brain feels excessive loss
People are more sensitive to loss than profit.
This is called "loss avoidance bias".
In a word, it is the secretion of the brain that feels the pain of loss greater than the joy of profit.
In investment, the following actions are expressed:
- Cannot be broken
- Sell panic in crash
- Inability to directly see employee damage
- Make an impossible transaction to return the loss
In other words, the risk is not just a number.
It is necessary to think including emotional damage.
Even with the same 100,000 yen, the 100,000 yen lost as a loss is strong and easy to remember.
High returns increase risk of leaving
What is important is not only the expected return.
It is also very important not to leave the market on the way.
For example, the characteristics of each investment style are:
| Investment Style | Features |
|---|---|
| Leverage High | Explosive but also forced loss-cut risk |
| In Investment | If it is large, it will be damaged greatly |
| Decentralized investment | Growth is loose but easy to continue |
| Investment | Easy to reduce timing dependencies |
The greater the short-term goal, the higher the risk of leaving.
It is a person who can leave the market for a long time.
If you lose money or money at once, you will not be able to participate in any subsequent opportunities.
Consider the maximum loss in practice
I tend to think about how much money as a beginner.
However, it is opposite in practice.
The first thing to think is:
- How many% may be lowered
- How long can I endure?
- Do you have to pay for living?
- Is it possible to continue investing in losses?
- 1Is it too concentrated on the symbol?
In other words, design that does not leave is priority rather than maximizing return.
This is a protection, but long-term investment is very aggressive.
Because it is possible to participate in the next rise section by continuing to remain on the market.
Basic Risk Management
The basics that beginners want to be aware are:
| 項目 | 考え方 |
|---|---|
| 分散 | Not biased to one symbol or asset |
| Cash Ratio | Leave the extra force to move quietly even when ing |
| 積立 | Disperse the timing to buy |
| 損切り | With al if the expected collapse |
| Living Defense Fund | Separate investment and living funds |
The most important thing is that it is not too much money to invest in life.
It is difficult to judge quietly even if it falls a little.
Common misunderstandings
| misunderstanding | In fact |
|---|---|
| High risk guarantees high returns | High loss potential |
| 50% fall back at 50% rise | You need a 100% increase to restore |
| Not profitable when dispersed | Easy to keep for a long time |
| Loss | Risk Management to Prevent Damage |
| Cash wasted | Become an option when you crash |
- Loss is harder to recover than profit
- Risk and return are not a simple 称metry
- Large loss breaks the profit
- High loss damage even on emotional side
- First, prioritize the design that does not leave
- It is important that long-term investment does not lose much
In investment, the power to reduce the loss as much as the power to win.
Avoid large losses and continue to remain on the market leads to long-term asset formation.