An Investment Average of 10% won’t Guarantee Success

An Investment Average of 10% won’t Guarantee Success

An Investment Average of 10% won’t Guarantee Success

I saw a great advertisement released by my office’s parent company today; I have never released what my office’s parent company is…and I am not about to start now! Notwithstanding my obsession with privacy, I couldn’t get over this info and felt like I should share.

Each portfolio has an overage return of 10%, a withdrawal of $30,000 fixed at 3% inflation, and starts with $500,000…yet the first portfolio leaves the person with a little over $19,000 while the second portfolio leaves a person with over $2,500,000!

Portfolio 1                                                                      Portfolio 2

Year Investment Return Withdrawal Account Balance Year Investment Return Withdrawal Account Balance
1 -8.4% $30,000 $427,900 1 1.3% $30,000 $476,600
2 4.0% $30,900 414,030 2 10.1% 30,900 493,646
3 14.3% $31,827 441,410 3 7.6% 31,827 499,385
4 19.0% $32,782 492,275 4 30.4% 32,782 618,417
5 -14.8% $33,765 385,752 5 -3.1% 33,765 565,419
6 -26.5% $34,778 248,942 6 31.5% 34,778 708,917
7 37.3% $35,822 305,976 7 16.8% 35,822 792,335
8 23.7% $36,896 341,596 8 5.2% 36,896 796,799
9 -7.3% $38,003 278,793 9 18.6% 38,003 906,602
10 6.6% $39,143 257,966 10 32.0% 39,143 1,157,884
11 18.6% $40,317 265,631 11 6.1% 40,317 1,188,270
12 32.1% $41,527 309,451 12 22.4% 41,527 1,412,559
13 -4.9% $42,773 251,484 13 21.1% 42,773 1,667,978
14 21.1% $44,056 260,516 14 -4.9% 44,056 1,542,024
15 22.4% $45,378 273,416 15 32.1% 45,378 1,992,099
16 6.1% $46,739 243,383 16 18.6% 46,739 2,315,890
17 32.0% $48,141 273,197 17 6.6% 48,141 2,419,903
18 18.6% $49,585 274,290 18 -7.3% 49,585 2,194,633
19 5.2% $51,073 273,535 19 23.7% 51,073 2,663,688
20 16.8% $52,605 224,883 20 37.3% 52,605 3,604,638
21 31.5% $54,183 241,605 21 -26.5% 54,183 2,597,028
22 -3.1% $55,809 178,282 22 -14.8% 55,809 2,157,378
23 30.4% $57,483 174,997 23 19.0% 57,483 2,508,718
24 7.6% $59,208 129,107 24 14.3% 59,208 2,808,257
25 10.1% $60,984 81,111 25 4.0% 60,984 2,859,042
26 1.3% $62,813 19,369 26 -8.4% 62,813 2,555,498

2 Questions for the analytics out there:

  1. What product do you think my company is trying to sell? hint – I have never sold this product, nor do I own one…
  2. What is the correlation between Portfolio 1 and Portfolio 2? hint – both portfolios represent the same time period

I need guesses!

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