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Average Return vs Compound Annual Growth

Every so often, it’s time to look at the terms that we use when discussing financial matters. I’d like to take a look at the terms ‘Average Return’ vs ‘Compound Annual Growth.’ These two phrases sound similar, yet the results can be quite different. The math isn’t complex, so we’ll start with a simple example. [...]

A Superbowl XLVII Roundup

First, it’s not the same when the home team, in my case, the Patriots, aren’t in the game. I don’t have any emotional interest in the outcome, but still, I watch. Not for the football, but for the commercials. 1984. It was the Washington Redskins and the LA Raiders. I’ll admit, I didn’t remember this, [...]

Dave Ramsey scares me

Dave had published his expectations that the market would grow 12% on average and right until 2000 there was little reason to dispute this. Only, there was something wrong with Dave’s math even then. There’s a difference between the long term CAGR (compound annual growth rate) and the average return. Let me explain. If in [...]

The 401(k) backlash

Recently I’ve read articles calling for either reform or dismantling of the retirement accounts known as 401(k). I understand Enough of human nature to know that in times when the market is shooting higher and higher there are those who will lobby for putting the Social Security Trust Fund into the stock market. Now that [...]

2009 Tax Rates and other Tidbits

A few thoughts as the year comes to a close: Fairmark has updated to reflect the 2009 rates, and it’s worth a look. Quite a few updates to note, personal exemption and standard deduction have both gone up, as expected, creating an $18,700 “zero bracket” amount. If you retire today with no other taxable income [...]

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