No. of Recommendations: 5
then it's risk-adjusted returns are its gross returns times 1-drawdown.
There are a bunch of standard ways that risk-adjusted returns are calculated.
Average return divided by MaxDD is not one of those ways.
In fact, MaxDD is virtually useless because it is just a measure of the one-time worst case event.

CalMar, StdDev, Sortino, Sharpe, Ulcer Index, Ulcer Performance Index -- these are all common measures.

Just eyeballing the 40 year balance on the IUL I ran, versus the 40 year balance on the spreadsheet... looks to me like the IUL finishes with more money.
The spreadsheet uses actual historical data.
I can't cut-paste from your pdf, but it says, "reflect a hypothetical rate at the average historical rates". I don't see anywhere where they state what the rate they used. So you cannot compare the two, since one uses real data and the other uses an average.

How *did* you create that PDF? I can't cut/paste from it, which is rather annoying. [...sounds of typing, grumbling in the background...]
Got it!
I checked the Illustration at 4 different dates 10 years apart, and every one computed as an annual gain of 8.8%.

This illustration is garbage and arguably fraudulent. They don't show any years where the return is zero, nor any years where the return is 12%. Yet we know from the historical data that 25% of the annual returns are < 0% (and therefore would be floored at 0%) and 45% of the annual returns are > 12% (and therefore would be capped at 12%)

In order to do a like-to-like comparison, you'd have to compare their illustration with a S&P500 B&H spreadsheet with a fixed 10.8% annual return. Or 9.2% for a 60/40 asset allocation.

Oh, hmmm, very interesting. My spreadsheet computes the CAGR for the IUL portfolio and it computes as [....drum roll ....] 7.0% to 8.5%, depending on the exact starting date. So it appears they not only bogusly used a constant annual gain, but they put a bit of thumb on the scale.
Print the post  


The Retirement Investing Board
This is the board for all discussions related to Investing for and during retirement. To keep the board relevant and Foolish to everyone, please avoid making any posts pertaining to political partisanship. Fool on and Retire on!
Live Video Event Monday!
The GP team is hosting a live video event on Monday at 4 p.m. ET. Don't worry if you can't make it — we'll have a replay and a transcript. Click for more!
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.