Interest based investment strategy

[wonder_boy]

Okay, I'm wondering if an investment that averages x% over the term of an investent and an investment with a fixed return of x% over the term of an investment are equivalent...I'm not really sure at all, and itas advised i can both explain and somehow graph this.

Can anyone investigate my above proposition to see if it is warrented? If not, could you give any and all reasons why?

I know that i have to consider simple fo compound sperately...but...yeah. I would love a coupel fo different people's responses, haha...i would love any response really. It would be a huge help.


Thanks.

 

[HallsofIvy]

That's pretty much the definition of "average"- the single value that gives exactly the same result as a variable. Yes, the average value of x% must give exactly the same result as a constant value of x% in order to be called the "average".

 

[CRGreathouse]

That depends on a lot of things. If you never make deposits, and the average is a sensible one, then it's all the same, as HallsofIvy said. If you're adding money, volatility is generally good -- assuming you're dollar-cost averaging.