$123,783 Actual Account Value ... OR ...an Annualized Return of 4.36% over the 5 Years.
Are YOU Surprised it's so low? Just ONE BAD YEAR can Kill your Return. All that work and RISK taken for 4 good up years and just one stumble destroys it all. ONLY 4.36% over 5 years. Wow!
YES... The Math is Correct!
$100,000 + :
+10% or $10,000 = $110,000 ...End of Year 1
+10% or $11,000 = $121,000 ...End of Year 2
-(40%) or $48,400 = $ 72,600 ...End of Year 3
+55% or $39,930 = $112,530 ...End of Year 4
+10% or $11,253 = $123,783 ...End of Year 5
Wait... Your are not being fair because you are showing the Down year before the UP year!
OK... Lets switch it around:
+10% or $10,000 = $110,000 ...End of Year 1
+10% or $11,000 = $121,000 ...End of Year 2
+55% or $66,550 = $187,550 ...End of Year 3
-(40%) or $75,020 = $112,530 ...End of Year 4
+10% or $11,253 = $123,783 ...End of Year 5
$123,783 Actual Account Value ... OR ...an Annualized Return of 4.36% over the 5 Years.
No Change!
NOW... think about how much lower your return would be when factoring in the fund annual management fees, trading commissions and the annual fee paid to your fee based investment advisor (CFP). I think you get the picture.
Always talking in Percentage terms and never fully illustrating and explaining in real dollar terms what just one big down year or down period can do to your long-term return.
This is the dirty little secret of the investment business.
NOW here IS the Well Kept Secret your Fee Based Financial Planner / Financial Advisor Doesn't want you to Know:
What happens if You can eliminate the -(40%) Down Year?
They would say, you can't eliminate the down years and keep the Up Years! That is impossible to do!
OK ...What if you can eliminate the Down Years in Exchange for accepting less in up Years ...say 50% less.
