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Investing Basics Know-How
You’ve carefully weighed in your own mind how you want your retirement portfolio to look: just the right amount of your assets allocated to stocks versus fixed-income investments. You feel comfortable with the growth/income and risk profile of your portfolio, and you have carefully diversified your investments over all the investment categories, and even within each category. Then, inevitably, the market jumps up or down, and your portfolio is thrown completely off balance.
First, relax. Your asset allocation guidelines are just thatguidelines.
Turn to any listing of mutual fund returns, or even stocks, and you will likely see a "summary" of those results, referred to as the "average" return. For example, a listing of mutual funds in a particular category may show the average return for the fund in that category. A different listing may show a particular fund's returns for each of the last five years, and an average annual return over that five-year period.
Many individuals assume those averages are all calculated in the same way. In fact, they are not.
The dictionary definition of an average is: A single value that summarizes or represents the general significance of a set of unequal values. But there are a number of different ways to present a "summary" of values, depending on what you are seeking to measure.
What are the different "averages," and how are they calculated?
Investing Basics Articles
- Extreme Anxiety: Evaluating Current Market Levels
- Market Barometers: A Look at Stock Indexes and How They Work
- Stand Up and Be Counted: How to Value a Stream of Payments
- Proxy Voting
- Beginning Investor: How to Start
- The Basics of Portfolio Allocation
- Dividend Safety Signs and Warning Flags
- Dogs of the Dow
- The Bottom Line: How to Calculate Your Portfolio's Return
- All Averages Are Not Created Equal