Stop Using Arithmetic Returns!

Summary: Arithmetic means ALWAYS overstate investment returns over timeNegative returns are actually fractions less than 1, not negative numbersAvoiding drawdowns and reducing volatility can enhance your returns Two people are each investing $10,000. Their returns over five years are detailed in the table below. Year 1Year 2Year 3Year 4Year 5Average returnInvestor A30%-25%-10%45%20%12%Investor B15%-10%10%25%10%10% Investor A … Continue reading Stop Using Arithmetic Returns!