How much can securities fall in price?

This is indeed possible in two cases:

  1. Economic Crises: Economic crises occur regularly within the framework of the existing economic model. Typically, this happens with a frequency of about 10 years. However, these crises do not completely destroy the economy. Securities temporarily become cheaper (prices plummet), then gradually recover (usually over a couple of years) and continue to grow. For instance, during the severe global crisis in 2008, I lost about 50% on my securities (I held shares in the AlfaCapital mutual fund). If I had sold those securities in 2009, I would have lost half my money. I chose not to do so. Within a couple of years, prices returned to pre-crisis levels and continued to rise.
  2. Investing in Poor Companies: The world is constantly changing, evolving, and facing competition. It’s entirely possible that even a major company like Gazprom could face bankruptcy in a few years if people begin to heavily shift towards renewable energy sources. In this scenario, investors would lose their money. A similar setback could happen to any company you’ve invested in (bought their shares or bonds). Predicting this is impossible. So, what’s the solution?

There’s a very simple and effective solution: DON’T BUY SECURITIES OF A SINGLE COMPANY, or even a few companies, as this creates risk (no one knows the future with 100% certainty). Instead, buy into ALL companies rather than just ONE (or a few). On the stock exchange, you can buy an INDEX (ETF) that represents the entire market. This safeguards you from the second problem.

Isn’t it easier to buy shares of one company than all?

It doesn’t matter, because you don’t need to manually buy securities of different companies. You purchase an index fund’s security (ETF) from a single “company,” which already includes all the others.

Take another look at the dynamics of the Russian market’s growth:

In essence, this is the “average temperature in the hospital” at the stock exchange. Some patients (companies) feel great (companies are growing), some have a fever (market capitalization drops), and some have already passed away (gone bankrupt). What’s important for us is not the individual companies, but that the ENTIRE INDEX (all companies collectively) is on the rise.

You can acquire the entire index by purchasing ETF securities from a FUND. This is the best solution because it mitigates risks.

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