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In response to my earlier post, JABoa wrote, in part, " This is because, if you calculate gains and losses in percent, you must multiply them, not add them.

The correct annual equivalent returns in JAFO31's two examples are 4.000% and 6.911%, to 3 decimal places.

Glad to know the methodology and the exact numbers [presumably on a annual compound basis? (:>)] from someone far more skilled in mathematics than I. As I admitted in my first post I can be a little lost without all my software.

<<The mean return for the three years is 16.67% -- (50% + 50% + -50%)/3 = 50%/3 = 16.67%. How deceiving, because the compounded rate of return is actually more like 4% [emphasis added in this post] (NOTE ballpark guess because I do not have the time to calculate now and my easy to use software is on the other computer). [additional emphasis added in this post]

. . . The mean return for the three years is 7% -- (10% + 10% + 1%)/3 = 21%/3 = 7%.>>

I thought that I was acknowledging that actual compounded rate of return was significantly different than apparent mean average for the three years, but I guess I was not clear.

JABoa also wrote A minor point, but there are things JABoa the Pedant can't let slide past.

I was trying to illustrate the difference between the real compound rate of return versus the apparent mean average with volatile investments to show why volatility should not be completely ignored. I was not trying to slide anything past anybody.

With JABoa's able assistance we know that the volatile investment from my example -- +50%, +50%, -50% has a 4.000% return over three years, which is very different from the apparent mean average of 16.67%. We also know that the more conservative investment from my example -- +10%, +10%, +1% has a 6.911% return over three years, which is not very different from the apparent mean average of 7%, and would have been the better returning investment over that three yeqr period. JABoa has illustrated the point I wanted to make more clearly than I did! Thanks,

Regards, JAFO

<<The mean return for the three years is 16.67% -- (50% + 50% + -50%)/3 = 50%/3 = 16.67%. How deceiving, because the compounded rate of return is actually more like 4% [emphasis added in this post] (NOTE ballpark guess because I do not have the time to calculate now and my easy to use software is on the other computer).

. . . The mean return for the three years is 7% -- (10% + 10% + 1%)/3 = 21%/3 = 7%.>>

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