Re:U.S. stock market returns – a history from the 1870s to 2022
by fallingfrog on Friday January 06, 2023 @03:08PM
(#34280273)
Correct, because we're averaging together things that are multiplied, not things that are added. Arithmetic mean is rather meaningless here.
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Re:U.S. stock market returns – a history from the 1870s to 2022
by getToTheChopin on Friday January 06, 2023 @03:19PM
(#34280439)
The arithmetic mean gives you a sense of the return you can expect by investing in the market for a single year.
When investing over multi-year periods, the geometric average is more relevant.
You can see the impact on this chart, where the average return (and volatility) drops over longer time periods: https://themeasureofaplan.com/wp-content/uploads/2023/01/Rol...
