If 1 lac investment in shares rises by 50% (first year) and then drops by 50% (second year), what will be the return on investment?

Common answer:  Zero

1 Lac. First year return +50%, second year return -50% average return 0%.

Correct answer is loss of 25%

How?

1 Lac becomes 1.5 lacs with 50% rise.

1.5 Lacs becomes 75 Thousand with 50% fall.

Following is the picture to show why is it difficult to recover from losses.

Some investors hold stock even when it is down 90%, hoping that it will come back to their purchase price someday. They expect to get 900% return from company that is massively under performing.

We train traders in use of trading systems and help them set up profitable trading business. Join our Share Market Courses in Mumbai to become top trader.