Calculating the simple average rate of return on any given investment can be confusing and even misleading when trying to understand the growth or lack of growth in your investments.
Watch this short video to learn a more accurate way to calculate the average rate of return through clear and realistic examples. By better understanding your investment performance, you'll be able to make more informed investment decisions!
- 00:02Introduction to misleading investment returns
- 00:11Five scenarios of 20% average returns
- 00:45Scenario 2: 40% and 0% returns
- 01:00Scenario 3: 60% and -20% returns
- 01:17Scenario 4: 100% and -60% returns
- 01:28Scenario 5: Las Vegas example
- 01:50Real-world ending balances comparison
- 02:13Better methods for calculating returns