Geometric vs. arithmetic returns
Yesterday I posted a video explaining why Dave Ramsey’s claim that retirees can safely spend 8% of their portfolios did not make sense.
I realized after posting that his claim was even worse than I initially thought.
The S&P 500 returned around 12% per year 1926-2022 measured as an arithmetic average.
Measured as a geometric average, which is what matters to investors, it has been closer to 10%.
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