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Ok that os where the analogy breaks down I guess. In the stock market the “idiots” don’t lose their money, they just get below average returns. The average of
by quickthrower2 3y ago
Ok that os where the analogy breaks down I guess. In the stock market the “idiots” don’t lose their money, they just get below average returns.
The average of 1,1,1,1,1,37 is 7. If these are % yoy gains of traders who try to beat the market.
- AnthonyMouse 3y agoSome of the people who try to beat the market do actually lose their money. You can go play games with options trading or short selling or high volatility stocks and not just get 1% instead of 7%, you can lose the majority of your principle. Or all of it. Or even end up in debt. The average of 37, 8, 8, 8, 8, -27 is also 7.
- FooBarBizBazz 3y ago1.01^5 * 1.37 = 1.43988 1.43988^(1/6) = 1.06264 So, really 6.26% CAGR. Not a huge difference here. But it is lower. The difference really shows up when you start seeing losses. The extreme case of one year with 100% loss demonstrates things.