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Big Drawdowns: The Wild Ride To Riches

Every investor daydreams about going back in time and getting in on the ground floor of a super successful company. Amazon went public at $18 and now trades above $3000. That's a whopping return of 17,000%! Being an early investor would've made you filthy rich - if you were able to hold on.

Staying invested is much easier said than done. Hindsight is 20/20. We have the privilege of knowing things worked out for Amazon, but it was a bumpy ride.

While there were many years of amazing returns, there were also tense moments where all seemed lost. To endure these drawdowns you would've needed an iron stomach. 

YearAnnual Return
1998966.39%
199942.18%
2000-79.56%
2001-30.47%
200274.58%
2003178.56%
2004-15.83%
20056.46%
2006-16.31%
2007134.77%
2008-44.65%
2009162.32%
201033.81%
2011-3.83%
201244.93%
201358.96%
2014-22.18%
2015117.78%
201610.95%
201755.96%
201828.43%
201923.03%

Would you've been able to hold on during the Great Financial Crisis or during the Tech Bubble? I wouldn't have. 

A lot of stocks don't come back. Every year companies fail, even industry titans that once were unstoppable. Yahoo, Myspace, Enron, Blockbuster.

It can be incredibly rewarding to ride out the downs, but things can also turn grim. A bounce back might never happen.

How do you know when a drawdown is temporary or when it's permanent? You won't. That risk is part of the deal. 






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