A lesson on the impact of fat tails and black swans:
If you missed the 20 best days of the S&P from 2000 to present, your annualized return went from 8.33% to -0.52%.
However, if you missed the 20 worst days, your annualized return went from 8.33% to 18.82%.
If you missed the 20 best days of the S&P from 2000 to present, your annualized return went from 8.33% to -0.52%.
However, if you missed the 20 worst days, your annualized return went from 8.33% to 18.82%.
Correction: The annualized ROR formula was incorrectly calculated using 365 days in the year and should have been using 250 trading days.
The general phenomena that the tails are very fat holds, but the correct numbers are:
The general phenomena that the tails are very fat holds, but the correct numbers are:
If you missed the 20 best days of the S&P from 2000 to present, your annualized return went from 5.65% to -0.35%.
However, if you missed the 20 worst days, your annualized return went from 5.65% to 12.24%.
However, if you missed the 20 worst days, your annualized return went from 5.65% to 12.24%.
Thank you to @EconomPic for catching the error and letting me now.
@EconomPic And he has further notified me that there are 252 trading days in the year not 250 which accounts for .02% difference in his calculation and mine:
