The following is a screen capture of a comment exchange between BG (the same BG who comments on posts here at AFM) and Pamela Yellen:
Ms. Yellen doesn’t understand that compound annual growth rate (CAGR) is the same as the average annual return.
The calculation is very simple. Using the VFINX adjusted closing price of $95.51 on 12/19/2005 and the closing price of $188.21 on 12/18/2015, we can calculate the CAGR or average annual return like this:
THIS is the return that investors should be concerned with.
The average return (also known as the arithmetic mean), which is simply adding up all the one-year returns and dividing them by the number of years, would have been a much higher, but misleading, 8.92%.
Be wary of anyone who calls themselves an expert.
