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If you take the 150,000 you earned, and divide it by the 250,000 you contributed, you get 0.60 or 60%, so 150,000 is 60% of 250,000. Now this is the average % gain over 24 years, now divide .60 by 24 and your average annual rate of return would be 0.025 or 2.5%.
If you take the 150,000 you earned, and divide it by the 250,000 you contributed, you get 0.60 or 60%, so 150,000 is 60% of 250,000. Now this is the average % gain over 24 years, now divide .60 by 24 and your average annual rate of return would be 0.025 or 2.5%.
(150000/25000)=0.60
0.60/24=0.025 or 2.5%
This doesn't work either, as the money slowly built up through time. Money contributed earlier had more time to accrue interest than money added later.
The only way to make this work is to make a lot of assumptions, such as that the amount of money contributed each year was the same (which is not true), or that it rose each year with inflation, etc. I'm sure there's a calculator that does this based on a chosen interest rate, but in this case you're looking to solve for the interest rate.
If you take the 150,000 you earned, and divide it by the 250,000 you contributed, you get 0.60 or 60%, so 150,000 is 60% of 250,000. Now this is the average % gain over 24 years, now divide .60 by 24 and your average annual rate of return would be 0.025 or 2.5%.
(150000/25000)=0.60
0.60/24=0.025 or 2.5%
Even if it were 60% that would be wrong since investments are accrued every single year and rate returns work in exponential form therefore you can't just divide it.
Your 2.5% is wrong and cannot be achieved as 60% divided by 24
The correct form is (1+r)^(1/n) or 1.6^(1/24) which would give you a rr of 1.97% a year. You may think this is small but with higher nmbers the differnces start to be really huge
Even if it were 60% that would be wrong since investments are accrued every single year and rate returns work in exponential form therefore you can't just divide it.
Your 2.5% is wrong and cannot be achieved as 60% divided by 24
The correct form is (1+r)^(1/n) or 1.6^(1/24) which would give you a rr of 1.97% a year. You may think this is small but with higher nmbers the differnces start to be really huge
Sorry but this is correct for the average annual rate of return.
This doesn't work either, as the money slowly built up through time. Money contributed earlier had more time to accrue interest than money added later.
The only way to make this work is to make a lot of assumptions, such as that the amount of money contributed each year was the same (which is not true), or that it rose each year with inflation, etc. I'm sure there's a calculator that does this based on a chosen interest rate, but in this case you're looking to solve for the interest rate.
Your absolutely correct but we have to use the facts we have to try and get a ballpark average annual rate of return.
Thank you for giving me a ballpark. Personally its the end number that matters. People who believe stocks are the way to go are always blah blah blahing down in the weeds about really complicated numbers.
How much did my money earn in average over x amount of years? That's what matters to people trying to figure out whether to put it in CD, or bury it in the back yard, or whatever.
And yes the person could suck at investments. Which is why its important to know that bottom line number. I suck at investments. I do not have some highly paid investment firm doing this for me. I do have the L fund managers at TSP doing just as badly as I did which does not make me happy.
So....a rough figure of 1.97. Barely better than the recent low rates at a bank. And probably going to get worse as I continue to lose in the downturn.
I think 401k's and stocks stuck for the average (or ok, below average) guy.
Feeling scared and p*ssed.
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