This year (as of October 27), six companies together have lost one trillion $$ in market capitalization. They are Apple, Microsoft, Alphabet/Google, Amazon, Tesla, and Meta/Facebook.
Meta has crashed, losing nearly 75% of its value on the year.
![](https://cdn.uploads.micro.blog/87936/2022/d9a2693cb6.png)
Instead of discussing the merits of Facebook’s business or how much money it’s spending on Second Life 2.0, I’d like to highlight the math behind this 75% loss.
The math behind crashes is brutal.
When asked what gain is required to recover from a 75% loss, most people will answer a 75% gain.
Unfortunately, that is not correct. The answer is a 300% gain.
For example, if you lose $75 of an initial $100, you are left with $25. To recover, you must make $75 back (obviously). But, $75 is 3x your (now) $25 investment or a 300% gain.
Here is another way to look at it:
You must double your money twice over: turn $25 into $50, and then $50 into $100. Using an estimated 10% stock market return, it will take you 14.5 years just to break even.
Facebook investors who bought on January 1, 2022 and continue to hold have a long road ahead.
This table shows gains required to recover losses ranging from 5% to 90%. As losses steepen, the pain accelerates.
![](https://cdn.uploads.micro.blog/87936/2022/d5353c8724.jpg)
It makes sense why Warren Buffett’s two rules of investing are:
“Rule #1: Never lose money. Rule #2: Never forget Rule #1.”
-Warren Buffett
Severe losses really set you back.
It’s the math of it!
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