The Market Master calculation notebook
A higher fee, an uncomfortable loss or a position that looks affordable can each change a decision. Work through three transparent examples, change the assumptions and see exactly what the calculation can and cannot tell you. No account or market data feed is needed.
Change one assumption
Test a cost, a loss or a planned position. These examples use hypothetical numbers, not live prices or return forecasts.
Compare the same starting balance and gross return, changing only the annual fee.
Model: starting amount × (1 + gross return − annual fee)years. No contributions, taxes, inflation or changing returns. Rounded to the nearest dollar.
Add contributions and stress scenarios →A percentage recovery starts from a smaller balance. See the gain needed to return to the starting point.
Model: loss ÷ (100 − loss) × 100. The result is arithmetic, not the chance of recovering or the time it will take. An investment may never recover.
Read the risk management guide →For a hypothetical long stock position, divide the remaining risk budget by the distance to the stop.
Model: floor((budget − costs) ÷ (entry − stop)). This simplified example excludes leverage, liquidity and account buying power. A stop is not a guaranteed execution price.
Inspect the full risk calculation →Worked example / 01
Imagine two investments with the same hypothetical gross return of 6% a year. Both begin with $10,000 and receive no further contributions. One charges an annual fee of 0.20%; the other charges 1.00%. In this simplified model, the net annual returns are 5.80% and 5.00%. Over 20 years, the difference is approximately $4,350. It is not just the first year's $80 fee difference multiplied by 20. Money removed through fees also loses the opportunity to compound.
This comparison isolates a cost; it does not establish that the cheaper investment is suitable. A fund may track a different benchmark, hold different securities, take a different currency exposure or apply a different investment policy. Compare equivalent exposures before interpreting a fee gap. Then read the current prospectus and account fee schedule to find costs that the headline expense ratio does not cover.
A $36 annual account charge is 0.36% of a $10,000 balance, but 3.60% of a $1,000 balance. That is why the same account can look inexpensive to one investor and costly to another. A transfer charge, foreign exchange spread or minimum dealing commission may matter more than a small difference in a fund's ongoing percentage fee.
Write down your balance, expected contribution pattern and likely number of transactions before comparing providers. Separate percentage charges from fixed charges. Do not treat a promotional interest rate or temporary fee waiver as a permanent feature. The guide to investment fees explains the categories, while the portfolio simulator lets you add contributions, inflation and an explicit shock scenario.
The calculation subtracts the fee from the annual gross return and compounds the resulting rate. Actual fee deduction dates and fund accounting may differ. Returns do not arrive at a constant rate, and taxes, trading costs, distributions and currency changes can alter the result. The example is a controlled comparison, not an expected portfolio value.
Worked example / 02
Start with $100. A 30% loss leaves $70. A subsequent 30% gain adds $21, bringing the value to $91. The missing $9 is a consequence of using a smaller starting balance for the gain. To return from $70 to $100, the required gain is $30 divided by $70, or 42.86%.
| Loss | Value remaining from $100 | Gain needed to return to $100 |
|---|---|---|
| 10% | $90 | 11.11% |
| 20% | $80 | 25.00% |
| 30% | $70 | 42.86% |
| 50% | $50 | 100.00% |
| 75% | $25 | 300.00% |
The table says nothing about whether a recovery will happen. A business can fail, a token can lose its economic use and an investment can become permanently impaired. A past price is not evidence of fair value. Nor does a large fall make a second fall mathematically less likely.
Instead of asking only when the price will return, compare today's evidence with the reason for owning the asset. Has cash generation changed? Is the balance sheet weaker? Has your time horizon shortened, or has one position become too large relative to the money you can afford to lose? Those questions require judgment and sources, not just a recovery percentage.
Additional contributions change your personal break even point but do not repair the original investment's performance. If you add cash, record that cash flow separately. Otherwise an account balance that has returned to its former level can hide a loss. Use the portfolio drift and rebalancing guide to distinguish allocation changes from a reaction to a recent price move.
Worked example / 03
Suppose a hypothetical account has $50,000 and the trader chooses a planned risk budget of 1%, or $500. A long stock position is considered at $100 with an intended stop at $95. The price risk is $5 per share. Estimated total entry and exit costs are $5, leaving $495 for price movement. Dividing $495 by $5 gives 99 whole shares. The position value at entry is $9,900.
This is a size calculation, not an instruction to buy. It assumes the full position can be entered at the chosen price and exited at the stop. If the market opens at $92 and the exit fills there, the price loss on 99 shares is $792 before costs. Adding the assumed $5 cost produces a $797 loss, exceeding the original plan by $297.
The planned loss budget constrains the price risk you choose to take. Available cash constrains the position you can actually fund. Liquidity constrains whether the entry and exit prices are realistic for the order size. Satisfying the first constraint does not satisfy the other two. A stop order also introduces execution uncertainty, while a stop limit order can remain unfilled.
The calculation assumes a fully funded long stock position in one currency, whole shares and one fixed total cost estimate. It does not model derivatives, margin requirements, short sale borrowing, tax or currency conversion. For those details, start with the relevant instrument rules and use the full position size calculator in the appropriate asset mode. Read how market, limit and stop orders differ before assuming that a stop specifies the final execution price.
