Brian Livesay San Diego Retirement Guardian said “An investor should monitor investments periodically to see what their actual returns are vs. the average return the investment products prospectus had illustrated.”
Actual returns are the real returns an investor receives from an investment. The investor’s account value actually increases or decreases by an amount giving the investor the actual return in the investment. An investment of $20,000 with an actual return of 25% over a two year period would have a gain of $5,000 with an account value of $25,000 at the end of the second year.
An average return is based on multiple returns averaged together. Average returns can make an investment seem much better than it actually is compared to the actual returns in the investment. An average return of 25% can be a loss of 50% and a return of 100%. In this example the investor invests $20,000 dollars losses 50% the first year leaving the investor with $10,000. In the second year the investment returns 100% giving the investor a $10,000 gain for the year. At the end of the second year the investors account value is back to the original investment of $20,000. The actual return over the two year period is zero but the average return is 25%. Using the average return the investor would think the investment’s account value would be greater than the original investment at the end of the second year. In reality the investor has exactly the same account value as when the investment began.
Most investments are sold based on the average return of the investment over a period of time. An investor should take the average return of an investment with a grain of salt. The actual rate of return will be significantly different than the average rate of return as the above examples illustrate.
For more information visit Brian Livesay’s Who Is Page here in the Journal
Or see the article in Small Business Trendsetters
Or the article in CNN iReport “Wills, Trusts, and Probate | Differences You Need To Know”
Brian Livesay The Retirement Guardian
You may contact him at his office
Livesay Capital Solutions Inc.
1761 Hotel Circle S. Ste 360
San Diego, CA 92108
Call at 866-726-0725 / 619-281-8377
Or visit his Web Site www.retireestaxgroup.com