Monday, November 5, 2007

Thinking In Percentages Not Absolutes (Investing)

Question: Which hurts your investment portfolio value the most?

  • You own $10,000 worth of a mutual fund representing the Nasdaq Composite index. The Nasdaq Composite, which opened at 2,795, drops by 200 points by the time the market closes today. Headlines scream about a large market loss.
  • You own $10,000 worth of stock in a company, which opened at $8.00/share and falls to $7.20/share by the time the market closes today.
Choose your answer. In the next day or so I'll post my answer, an explanation, and why I highlighted this scenario.

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