Don't be Fooled by Misleading Returns

[Devin James]

Why we don’t like ARR (Average Rate of Return)

It’s easy to skew the numbers.

Here's an example of a positive ARR of 12.5%, but the investment loss is $50.

Year 1

Start Value: $100

End Value: $25

Annual Return: -75%

Year 2

Start Value: $25

End Value: $50

Annual Return: 100%

ARR = 12.5%

Am I missing something here?

Which calculation do you dislike and why?