April 26, 2013 1 Comment
Both investments have an 8 percent average annual return. But Investment #1 has a wide range of returns, while Investment #2 has a stream of returns that more tightly hug the average annual return.
If each of the points on the charts represents a monthly return and both investments achieve the same end result, which investment should you choose?
The answer: Investment #2 — the one with the tighter distribution of returns since it gives you a higher probability of achieving a higher return. Read more of this post