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  • In theory, would I lose something from the principal amount too? Say, the graph sloped upwards and right before the period is over, it sloped down. For example: during the investment it was at 100, it soared high but right before I finished the period it went down to say 99. In that case do I lose all of the principal amount or just some of it?
    – Severus Snape
    Commented Jul 21, 2021 at 16:32
  • Yes you can absolutely lose some of your principal - just not all of it. Depending on the risk (variance of returns) of the fund you might lose, say, 30% over 3 years in a worst-case scenario. but the average return might be 20% and the best case might be 100%.
    – D Stanley
    Commented Jul 21, 2021 at 16:38
  • There are investment vehicles that protect your principal by giving up some of the upside (e.g. if the fund gains 20% you only get 10%, but if the fund loses 10% you lose nothing), but they are typically only available to very large investors (meaning I don't know of a mutual fund or ETF that works that way).
    – D Stanley
    Commented Jul 21, 2021 at 16:39
  • 1
    There are a variety of structured annuities that provide a caps along with downside protection. A common type offers 7-10% gain to the upside (depends on the sector/ETF chosen) while indemnifying you for the first X percent of the downside (say 10%). These are generally based on a combination of option positions and if you do it yourself, you'll have a higher profit cap and/or larger amount of downside protection. Ironically, these two numbers get even higher (a good thing) when implied volatility increases.
    – Bob Baerker
    Commented Jul 21, 2021 at 17:37
  • 6
    Prior results really don't predict future returns. It is a common practice for someone wanting you to invest in a fund to first launch multiple funds, then stop marketing the ones that don't give good returns. If the return is completely random, the funds marketed will all have above-average past returns, despite there being no reason to think they are better than random.
    – Yakk
    Commented Jul 22, 2021 at 14:00