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The Myth of the Average Rate of Return

On this episode, Kristin Colca busts the myth of average rate of return and explains how an investor can calculate actual rate of return taking economic and market dynamics into account.

Did you know that although it is widely accepted as an indicator of how an investment may perform in the future the average rate of return can be wildly misleading? If there is any kind of volatility in an asset, taking the average return disguises the recovery time needed when future volatility inevitability occurs. This can lead to unrealistic expectations about how much an investment will be worth in the future.

Kristin shows a real life example of average and actual rates of return using the S&P 500, and shows that taxes and fees can further deteriorate the return you think you’re receiving.

Why ride the roller coaster of volatility when there is an alternative that can offer you guaranteed returns year over year and access to your cash income tax free?

Key insights:

00:00 Introduction
01:03 Taking volatility into account
01:38 Interest rates’ dynamics
03:24 How to calculate Average and Actual Rate of Return
06:15 Factoring-in expense fees
07:46 Disguising the historic volatility

If you want to learn more about the benefits of whole life policy, check out this episode as well: https://100yearrei.com/signup-the-benefits-of-a-100-year-rei-policy/

About Jake & Gino

Jake & Gino are multifamily investors, operators, and mentors who have created a vertically integrated real estate company that controls over $225,000,000 in assets under management. They have created the Jake & Gino community to teach others their three-step framework: Buy Right, Finance Right and Manage Right®, and to become multifamily entrepreneurs.

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