GLOSSARY TERM
Permanent Loss of Capital
Permanent loss of capital means losing money in a way that is unlikely to recover.
What does this mean in practice?
This is different from a temporary market decline. Markets often fall and recover, but some losses become permanent. That can happen if a company goes bankrupt, if an investment fails badly or if you sell during a panic and never return to the market.
Example
If a stock falls 30% but later recovers, that was a temporary decline. But if a company collapses and its shares become worthless, that is a permanent loss of capital. The same can happen in practice if an investor sells after a deep fall, locks in the loss and never gets back into the market.
Why it matters
It helps you understand that not all risk is simply short-term volatility. Some risks can cause lasting damage, which is one reason diversification and avoiding unnecessary speculation matter so much.
Continue your path
Ready for the next step? Follow the Start Here path.
Go to Start Here