Investment expectations

Brownbear_2

prudryden wrote:

I noticed that you list as YOUR homepage, the homepage of The Investor's Association. Somehow, I think The Investor's Association might have something to say about it or at least they should. It takes years to build up a good reputation but one bumbling idiot can dissolve that reputation in a pool of mire. At the very least, its total misrepresentation and is punishable.

:beer: :T :beer:

ReportInvestor

dunstonh wrote:

For reference, I use the ACR but that data wasnt available on the Financial Express source.

Assuming that means the CAGR (compound annual growth rate) we can communicate on the same terms on MSE in future, which is probably the most important thing :T

And I can get rid of my signature appendage .

ReportInvestor

dunstonh wrote:

I just fired up the software which uses Lipper and that shows both straight line average and cumulative average.

If dh would define "straight line average" [not a standard investment industry term AFAIK] then I think we could be close to a resolution of this issue .

Chrismaths

Ok, as an investment manager and maths graduate, let's put this one to bed.

Dh has used a simple (or in maths-speak "arithmetic" - straight line is also understandable, as it is a linear function) average to quote annual performance. Prudryden says that this is fine, as because there is significant volatility in results quoting an annualised (geometric average) figure is pointless.

Whilst I agree that taking (any) average figure for past returns is pointless as a means of working out future annual returns, the most sensible way to quote an average past return (other than with no average) is as a geometric average - this is in fact industry standard.

The industry standard for measuring performance (GIPS) uses a time-weighted rate of return. The mathematics of this is based on a geometric method of calculation, not arithmetic.

However, if you are comparing two investments, it doesn't matter whether you use a simple or geometric average, so long as you are consistent.

ReportInvestor

Chrismaths wrote:

However, if you are comparing two investments, it doesn't matter whether you use a simple or geometric average, so long as you are consistent.

That's true up to a point. As long as you are comparing like with like over the same time period. Which obviously has big limitations .

The US is full of geometric comparisons and UK is strangely lacking in them. Perhaps that might explain why US investors are more informed?

Chrismaths

And offshore means Hawaii...

EdInvestor

prudryden wrote:

Insurance Offshore Bond

What a wise fellow.:D