Definition of downside
- the downside of fame
He could find no downside to the car.
the downside of living in the country is, of course, the long commute to work
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Downside refers to an investment's potential loss in value.
Let's pretend you purchase 100 shares of Company XYZ at $5 per share, for a total investment of $500. If the shares subsequently fall to $1 per share, your downside equals ($5-$1 = $4) per share, or $400.
The reverse is true for people who short stocks: For them, upside comes when the stock price falls.
Downside is the fundamental motive for avoiding any investment. The size of the downside, of course, varies with the investment -- and with the risk associated with that investment. Higher-risk investments generally have more downside (but they have more upside, too); low-risk investments generally have less downside and are thus primarily concerned with preserving the value of the original investment.
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