chris h - authorWeekend Side Note
If a hypothetical investment fund of significant size, say $180B, were to badly underperform for 2025, the results have serious implications.
In Canada, the TSX performed an astoundingly rare return of 28.5%. A well- managed fund performing at the rate of the market should expect a return of $50B resulting in a fund sized around $230B at year end.
If a hypothetical, poorly managed investment fund gained, say, a paltry 7.5% on such a generously giving market year, they should get a return of around $14B and final fund total of $194B at year end.
Counted in billions, 14 can appear a big number unless weighed against its absence of return. The poorly managed fund has actually incurred a short-term “loss of gains” in a rarely generous year of around $35B.
In the long term, over say the next ten years, that loss of $35B increases, at a yearly return of the initial paltry 7.5% (normally good for an underperforming year), to roughly double or $70B.
Fortunately, if the hypothetical fund continues under its current mismanagement, the ten-year 7.5% return is unlikely, thereby reducing the “missed out on” $70B to around $40B as best, or in this case worst, result from an extreme hypothesis of missing funds during one calendar year. Such “loss of gains” exaggerated annually accumulate to massive losses of squandered opportunity over decades.
In the real world, it is merely $14B thanks to the generous “hard to lose” market year, and the loss of opportunity goes unchecked while the pennies get counted.
#how #money #works
If a hypothetical investment fund of significant size, say $180B, were to badly underperform for 2025, the results have serious implications.
In Canada, the TSX performed an astoundingly rare return of 28.5%. A well- managed fund performing at the rate of the market should expect a return of $50B resulting in a fund sized around $230B at year end.
If a hypothetical, poorly managed investment fund gained, say, a paltry 7.5% on such a generously giving market year, they should get a return of around $14B and final fund total of $194B at year end.
Counted in billions, 14 can appear a big number unless weighed against its absence of return. The poorly managed fund has actually incurred a short-term “loss of gains” in a rarely generous year of around $35B.
In the long term, over say the next ten years, that loss of $35B increases, at a yearly return of the initial paltry 7.5% (normally good for an underperforming year), to roughly double or $70B.
Fortunately, if the hypothetical fund continues under its current mismanagement, the ten-year 7.5% return is unlikely, thereby reducing the “missed out on” $70B to around $40B as best, or in this case worst, result from an extreme hypothesis of missing funds during one calendar year. Such “loss of gains” exaggerated annually accumulate to massive losses of squandered opportunity over decades.
In the real world, it is merely $14B thanks to the generous “hard to lose” market year, and the loss of opportunity goes unchecked while the pennies get counted.
#how #money #works