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.

Year	Annual Return
1998	966.39%
1999	42.18%
2000	-79.56%
2001	-30.47%
2002	74.58%
2003	178.56%
2004	-15.83%
2005	6.46%
2006	-16.31%
2007	134.77%
2008	-44.65%
2009	162.32%
2010	33.81%
2011	-3.83%
2012	44.93%
2013	58.96%
2014	-22.18%
2015	117.78%
2016	10.95%
2017	55.96%
2018	28.43%
2019	23.03%

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.

Comments

The Art of Giving Feedback

Constructive feedback is an awkward affair. You don't want hurt feelings, but recognize the importance of honesty. You've tried the classic "hoping things will get better on its own" and unfortunately it hasn't played out. When giving feedback, here are a few things that I try to keep it mind. Start with empathy. Step into their shoes and understand their story. If you don't know, ask. Be genuinely curious. Feedback is a dynamic affair. Shared communication with a shared goal towards progress. Take the emotion out of it. Focus on the situation, not the person. Focusing on the person adds unnecessary weight to an already emotionally-bloated event. Be specific. Give clear examples. Vague feedback equals dismissed feedback. Doing above won't de-awkward things fully, but it will dampen it and increase the chance of better outcomes.

ELI5: The Stock Market

Today we get back to basics and answer some of the most common questions about the stock market.

Step One is Knowing

In school, we listen to our teachers. At home, our parents. Throughout our childhood, following instructions is praised and rewarded. When we're young, there's value in this. We don't understand how the world works quite yet, so guidance can be lifesaving. The bias to just accept obviously has drawbacks. Insert old jumping off a bridge adage . This conditioning is especially strong for kids from lower income households. Their parents are more likely in working class jobs involving strict order-taking. Parents of middle-class households tend to be knowledge workers where influence is essential. Studies have shown kids from middle-income households are more willing to negotiable with their teachers. They learn from their parents that things are not set in stone. This leads to better grades and learning outcomes when compared to their lower income counterparts who don't negotiable. In business, if we simply accept things as they are, we would never innovate. In work, w

Herman Ye

Search