1st year. Initial investment $20,000. At the end of the year, the capital grew to $30,000. Profit for the year is $10,000.
2nd year. Capital $30,000. At the end of the year, it was $60,000. So, the profit was $30,000.
3rd year. Capital $60,000. An additional $20,000 was invested. A total of $80,000 was invested. At the end of the year, it was $120,000. Annual profit is $40,000.
4th year. They had $120,000. $50,000 was withdrawn from the broker, the remaining capital under management is $70,000. At the end of the year, they increased to $100,000. Annual profit is $30,000.
If one year turns out to be unprofitable?
Then nothing happens, and the profit is calculated already in the profitable year. The value of all securities to the value of everything actually invested as of the last calculation.
5th year. Capital $100,000. At the end of the year, there was a drop to $80,000. Loss $20,000.
6th year. Capital $80,000. At the end of the year, it was $160,000. Profit $80,000. But the profit for calculations with us is $60,000, because the invested capital is $100,000.