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Making Sense of the Markets

Chambers Financial Group

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The Arithmetic of Loss

If you played King of the Hill as a child, you'll remember the goal was to beat the other kids to the top. Not easy (at least it wasn't for me). But going down the hill was a breeze. The other kids and gravity were always ready to help! It's easier to go down than up - this is the world of physics. The principle for how this applies to investments is called the Arithmetic of Loss. The math: losses hurt more than gains help. For example, losing 5% is more negative than gaining 5% is positive.

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