Have you ever noticed that your “Average Rate of Return” does not reflect the ACTUAL amount of money in your account? The main reason is that percentages do not equal dollars. Any time there is a negative return in your portfolio, average rates of return are meaningless, they CANNOT be used.

For example, a 50% return followed by a 50% loss would be an average rate of return of 0%.

However, if you had started with $1,000 and then earned 50%, you would have $1,500 (50% of $1,000 is a $500 gain).

Then, when you lose 50%, it is of your ENTIRE PORTFOLIO, so you have $750 left (50% of $1,500 is a $750 loss).

This is an Actual Rate of Return of -25%! Truth and Transparency is critical when looking at your money.