Whenever you hear the words “AVERAGE RETURN” of the markets be sure you understand what they mean. They do not mean the same thing as compounded annual growth rate (CAGR).

Average vs CAGR

$100,000 Invested in the S&P/TSX Composite Index

versus

$100,000 Compounded Annual Growth Rate (CAGR) at 4%

versus

$100,000 Compounded Annual Growth Rate (CAGR) at 4%

If in 2000, you deposited $100,000 in the S&P/TSX (risky & volatile), at the end of 2016 you would have accumulated $181,028, assuming “Average” return of the Index.

However, in the safer dollar portfolio “Compounding Annually” at 4% (a reasonable long-term rate of return on deposits into a properly structured Infinite Banking Plan, after the cost of insurance), you would accumulate an impressive $194,790!

The point here is:

AVERAGE is not the same as CAGR!

To end up with $181,028, as were the S&P/TSX results, the CAGR would only need to be 3.55% to attain this number; not 7.08% as “AVERAGE” indicates.

This shows that the market is not all that it is hyped up to be….

However, in the safer dollar portfolio “Compounding Annually” at 4% (a reasonable long-term rate of return on deposits into a properly structured Infinite Banking Plan, after the cost of insurance), you would accumulate an impressive $194,790!

The point here is:

AVERAGE is not the same as CAGR!

To end up with $181,028, as were the S&P/TSX results, the CAGR would only need to be 3.55% to attain this number; not 7.08% as “AVERAGE” indicates.

This shows that the market is not all that it is hyped up to be….