The magic of averaging

Penn Jillette (the magician) once called David Blane (another famous magician) some nasty names that you can’t say on national television.

Reason?

He said it’s because Blane pretends what he’s doing is real magic while Penn and Teller always make it clear what they’re doing is an illusion.

He was specifically referring to a bullet catch trick Blane did and the commentary that followed. Basically, Blane pretended it was a real stunt and that he got injured (he didn’t actualy get injured as far as anyone knows… but this was the gimmick he played up).

Penn’s argument is “magic” (entertainment and art) should be a celebration of life, not a tool to trick people or celebrate suffering.

It’s interesting.

It reminds me of a magic trick I see a lot in finance: the magic of averaging.

If I tell you that I can earn you 25% returns this year… but you might lose 25% next year… what’s your average rate of return?

0%, right?

Not great but at least you didn’t lose money, right?

Right?

Let’s see.

$100 + 25% = $125.

125 – 25% = $93.75

Ouch.

This kind of math is very common in the investment world.

And, lotsa people suffer when they end up losing money even when their average is flat or even positive.

Anyway, if you want to avoid the illusions of the financial industry and earn real compound growth year after year, let me show you how we do things downtown:

https://www.monegenix.com/life-insurance-planning/

 

David Lewis

This post brought to you by //The Rogue Agent//. David has been a life insurance agent, and worked with some of the oldest and most respected mutual life insurance companies in the U.S., since 2004. Learn more about him and his business, here.