I’m a complete beginner so please bare with me.
How is the average annual return number calculated?
I hear it’s been roughly 10% on average, historically
Are people making a lot more than I am thinking? As far as why compound interest is so amazing…
The average of a number is adding them all up, then dividing that number by the number of them added up.
As a quick example…
The numbers 2,3 and 4. The average is three. 2+3+4 is 9, then divided by 3=3.
Is the market open 5 days per week, roughly? Going up or down a % each day?
The number 1 as an example. By itself the average is 1 since it’s just one number. How does this work if say the market goes up 1% for five days in a row? That would be an average of 1%, despite happening five days in a row.
$1,000 for example.
If it gains 1% that’s $1,010.
Then the next day if $1,010 gains 1% the new balance is $1,020.10 correct? Then etc, gaining more than $10 each day despite the average being 1%
For the week it gained 1% average, but the total was more than $1,010
This happens so many days out of a whole year…I’m sort of confusing myself but does anyone see what I mean?
Like if hypothetically it gained 1% each day of the year the market is open, the average is 1% for the year, but obviously whatever you put in, you’d have way more than 1% of what you put in
Can someone explain this? As I’m sure I didn’t even word this the best possible way
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