Number magic

Assuming that there are two funds, if both funds are compounded, which of the A fund and the B fund will perform better as of the end of 2014?

A fund ・ ・ ・ 2011 plus 10%
2012 minus 70%
2013 plus 60%
2014 plus 80%

B fund ・ ・ ・ 2011 plus 10%
2012 plus 10%
2013 plus 10%
2014 plus 10%

If you simply calculate by addition
Fund A: 10-70 + 60 + 80 = 80%
B fund: 10 + 10 + 10 + 10 = 40%
Therefore, it seems that the A fund is the better fund.
However, this is the magic of numbers and it doesn’t really look like this.
What actually happens is
Fund A: 1.1 x 0.3 x 1.6 x 1.8 = 0.9504
B fund ・ ・ ・ 1.1 × 1.1 × 1.1 × 1.1 = 1.4641
At first glance, the A fund looks gorgeous, but in reality it is about -5%, which is a loss of principal.
On the other hand, the B fund looks modest at first glance (although it’s great to continue to return 10% a year), but it’s up about 46%, so it’s not bad at all.
Also, if the return of 10% this year continues for a certain period or more, the longer the period, the greater the number even with the power of compound interest, I think you can understand well by calculation.
Extreme numbers are used here, but when considering long-term operation, it is one way to emphasize that there is no minus than glitz, and even if there is, the price range is small. think.
It is best if you can buy A fund at Don Pisha immediately after minus 70%, but if you can aim for it, no one will have a hard time (^ _ ^;)
If you look back on what you actually did during the Lehman shock, you might find something interesting because you can see the difference between what you think in your head and what you actually did.
Rather than aiming for a big hit, I feel that it is possible to go farther by steadily stacking up in a hurry.

By Admin|2015-04-22|2015,News Release|

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