WHAT'S AVERAGE: THE AVERAGE OF THE YEARS vs. THE ...
[Pages:1]WHAT'S AVERAGE: THE AVERAGE OF THE YEARS vs. THE COMPOUNDED AVERAGE (Compounded Returns Are Adversely Affected By Negative Years And Volatility)
SIMPLE ANNUAL CHANGES
'00
'01
'02
1900 7%
-9%
0%
1910 -18%
0%
8%
1920 -33% 1930 -34%
13% -53%
22% -23%
1940 -13%
-15%
8%
1950 18%
14%
8%
1960 -9%
19%
-11%
1970 5%
6%
15%
1980 15%
-9%
20%
1990 -4%
20%
4%
2000 2010 2020
-6% 11% 7%
-7% 6% 19%
-17% 7%
'03
-24% -10% -3% 67% 14% -4% 17% -17% 20% 14% 25% 26%
COMPOUNDED ANNUAL CHANGE
01/01/1900 12/31/2021
Start
66.08
End Years
36,338.30 122
'04
42% -31% 26% 4% 12% 44% 15% -28% -4% 2% 3% 8%
'05
38% 82% 30% 39% 27% 21% 11% 38% 28% 33% -1% -2%
'06
-2% -4% 0% 25% -8% 2% -19% 18% 23% 26% 16% 13%
'07
-38% -22% 29% -33% 2% -13% 15% -17% 2% 23% 6% 25%
'08
47% 11% 48% 28% -2% 34% 4% -3% 12% 16% -34% -6%
'09
15% 30% -17% -3% 13% 16% -15% 4% 27% 25% 19% 22%
AVERAGE
Avg = 7.5%
AVERAGE
Avg = 5.3%
100,000
DOW JONES INDUSTRIAL AVERAGE (DJIA): LOG SCALE
10,000
1,000
100
Year 1 Year 2 Year 3
CASE A
5.0% 5.0% 5.0%
CASE B
4.0% 5.0% 6.0%
CASE C
9.0% 5.0% 1.0%
CASE D
15.0% -10.0% 10.0%
CASE E
25.0% -15.0% 5.0%
CASE F
30.0% -25.0% 10.0%
Simple Avg. Return 5.000% 5.000% 5.000% 5.000% 5.000% 5.000% Compounded Return 5.000% 4.997% 4.949% 4.419% 3.714% 2.361%
10 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010 2020
DJIA Annual Close
Index Growing At 5.3%
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