Investment Return Figures Can Take Many Forms

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Jim Lorenzen, CFP®, AIF®

Many years ago a prospective client told me his investment returns had averaged 25% per year over the past ten years.  This was back in the ’90s when the markets were going strong and everyone (it seems) was watching ‘talking heads’ give their ratings of mutual funds on the various tv business channels.

He was sure he was earning 25% per year because his $100,000 had grown to $250,000, a 250% increase he said.  And, as everyone knows, 250% divided by 10 years is 25% per year.

I didn’t bother asking him if he’d also been adding deposits to his account during that ten year period, in which case dollar-weighted returns would be different from time-weighted returns.  But, even without additions, his real return was more like 9.6% – not bad (remember, it was a bull market), but a far cry from 25%.

But, that 9.6% was his compound return – and that’s different from his average return.

If you’d like to learn more about deciphering investment returns, you may enjoy this special report.  You can access it by clicking the button below.

Enjoy!
Special Report: Understanding Investment Returns

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Jim Lorenzen, CFP®, AIF®

Jim Lorenzen is a CERTIFIED FINANCIAL PLANNER® professional and An Accredited Investment Fiduciary® in his 21st year of private practice as Founding Principal of The Independent Financial Group, a fee-based registered investment advisor with clients located in New York, Florida, and California. He is also licensed for insurance as an independent agent under California license 0C00742.  IFG helps specializes in crafting wealth design strategies around life goals by using a proven planning process coupled with a cost-conscious objective and non-conflicted risk management philosophy.

Opinions expressed are those of the author.  The Independent Financial Group does not provide legal or tax advice and nothing contained herein should be construed as securities or investment advice, nor an opinion regarding the appropriateness of any investment to the individual reader. The general information provided should not be acted upon without obtaining specific legal, tax, and investment advice from an appropriate licensed professional.

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Jim Lorenzen is a CERTIFIED FINANCIAL PLANNER® professional and An Accredited Investment Fiduciary® in his 21st year of private practice as Founding Principal of The Independent Financial Group, a fee-based registered investment advisor with clients located in New York, Florida, and California. He is also licensed for insurance as an independent agent under California license 0C00742.

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