I'm pretty sure I replied to you last time ;) One important aspect of looking at returns is comparing different strategies, but another one is in realistic planning. There's a lot of literature and marketing out there touting, in my view, grossly unrealistic numbers like 7-8% annualized compound returns as a reasonable expectation for sticking your money in an index fun on the S&P. Considering the huge differences in the effect of small changes to the annualized returns, it's important people have a realistic idea of the volatility in that expected number when they allocate the amount of money they save for the kind of retirement they want.
This graphic is awesome primarily because it shows that it is not correct to assume that volatility in the equity markets is averaged out completely during a timespan that is comparable to the average savings portion of a career.
This graphic is awesome primarily because it shows that it is not correct to assume that volatility in the equity markets is averaged out completely during a timespan that is comparable to the average savings portion of a career.
edit: oops, meant to reply to GP