Due to the onset of COVID, between February 20, 2020 and March 23, 2020, the TSX, (and most global stock markets), dropped by about 35%. Yes, a drop of 35% in just over one month. Since then, the TSX has rebounded 44%, but still remains 11% below the Feb 20, 2020 close.
Yes, that is correct. The stock market dropped 35%, has recovered 44%, but is still 11% below its prior peak. The reason is a quirk of math which has an important lesson for investors.
A loss of 35% means an investor must gain 54% to simply break even again.
For example, say you own a single ETF on Feb 20, 2020 that was trading at $100. Then say this ETF dropped by 35% to $65 on Mar 23 2020. How much do you have to gain from $65 to get back to $100? TheAnswerIs 54%. The reason is you have to gain back the $35 you lost from your lower base of $65, ($35 / $65 = 54%). A loss of 35% requires a gain of 54% to breakeven.
I can fully appreciate, from firsthand experience, that reading investment statements during a Bear Market can be difficult. It can actually cause emotional stress and even some nausea, but that discomfort is the ”price” one pays to benefit from the higher long-term returns associated with owning equities, (important - see last page of Future Expected Equity Returns )
The key to investment success is to make sure any money invested in the stock market can be left untouched for a minimum of 10 years, and preferably much longer. Not selling into a stock market downturn will ensure time for a portfolio to recover and provide potentially attractive long-term average equity returns. Five years before one slows down working, and begins to draw money from their portfolio, one should move a significant portion of their portfolio into fixed income.