[Wiki] - Percentage Gain and Loss (for new investors)

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MIpreRetirey
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Re: [Wiki] - Percentage Gain and Loss (for new investors)

Post by MIpreRetirey » Sun Jun 18, 2017 3:44 pm

One more trying of your infinite patience.
Since all examples in the page explain a two time period compound return (and how it is not the arithmetic addition of returns), who would/wouldn't concede that a better title would be "Compounding Percentage Gains and Losses."? To me it would.
Except for the marvelous graph, figure 1., which simply shows the inverse operation to geometric gain(loss) as the geometric loss(gain).
Thanks.
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Re: [Wiki] - Percentage Gain and Loss (for new investors)

Post by dbr » Sun Jun 18, 2017 3:53 pm

MIpreRetirey wrote:One more trying of your infinite patience.
Since all examples in the page explain a two time period compound return (and how it is not the arithmetic addition of returns), who would/wouldn't concede that a better title would be "Compounding Percentage Gains and Losses."? To me it would.
Except for the marvelous graph, figure 1., which simply shows the inverse operation to geometric gain(loss) as the geometric loss(gain).
Thanks.
Specifically the function is y = x / (1+x) give or take some sign conventions. Note this has the proper endpoints as x = 0 correctly implies y = 0 and x = -1 implies y (=) infinity Also x tends to infinity can be undone by y = -1 (those sign conventions!), or 100% loss even if the preceeding gain were infinite.

MIpreRetirey
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Re: [Wiki] - Percentage Gain and Loss (for new investors)

Post by MIpreRetirey » Sun Jun 18, 2017 4:07 pm

dbr wrote:
MIpreRetirey wrote:One more trying of your infinite patience.
Since all examples in the page explain a two time period compound return (and how it is not the arithmetic addition of returns), who would/wouldn't concede that a better title would be "Compounding Percentage Gains and Losses."? To me it would.
Except for the marvelous graph, figure 1., which simply shows the inverse operation to geometric gain(loss) as the geometric loss(gain).
Thanks.
Specifically the function is y = x / (1+x) give or take some sign conventions. Note this has the proper endpoints as x = 0 correctly implies y = 0 and x = -1 implies y (=) infinity Also x tends to infinity can be undone by y = -1 (those sign conventions!), or 100% loss even if the preceeding gain were infinite.
Excuse me, wrong graph (in my mind.) But the graph does demonstrate that 3/4 is the inverse of 4/3. Or -25% is the inverse geometric of +33%.

Pardon me. My mind is in the 1st quadrant.
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siamond
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Re: [Wiki] - Percentage Gain and Loss (for new investors)

Post by siamond » Sun Jun 18, 2017 4:09 pm

LadyGeek wrote:Do we have a consensus to "go live" and show new investors?
Sounds good to me. Nice work.
MIpreRetirey wrote:Since all examples in the page explain a two time period compound return (and how it is not the arithmetic addition of returns), who would/wouldn't concede that a better title would be "Compounding Percentage Gains and Losses."? To me it would.
I wouldn't! :wink: The fact that we chose to use a single consistent example doesn't change the fact that we're trying to explain a broader point. The big table is a good illustration of that.
dbr wrote:There is also this: https://en.wikipedia.org/wiki/Percentage see especially the section titled "Compounding percentages."
Good point. I always discover new Wiki pages I didn't know about. I guess it should be linked in the See Also section.

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Re: [Wiki] - Percentage Gain and Loss (for new investors)

Post by MIpreRetirey » Sun Jun 18, 2017 4:27 pm

dbr wrote:
MIpreRetirey wrote:One more trying of your infinite patience.
Since all examples in the page explain a two time period compound return (and how it is not the arithmetic addition of returns), who would/wouldn't concede that a better title would be "Compounding Percentage Gains and Losses."? To me it would.
Except for the marvelous graph, figure 1., which simply shows the inverse operation to geometric gain(loss) as the geometric loss(gain).
Thanks.
Specifically the function is y = x / (1+x) give or take some sign conventions. Note this has the proper endpoints as x = 0 correctly implies y = 0 and x = -1 implies y (=) infinity Also x tends to infinity can be undone by y = -1 (those sign conventions!), or 100% loss even if the preceeding gain were infinite.
as in quadrant 1, see how vectors here represent the same points in the page-figure 1.

Image .

And this inverse operation says that if y=a/b * x, then (swap y for x and solve) the inverse function is y = b/a * x
Last edited by MIpreRetirey on Sun Jun 18, 2017 7:37 pm, edited 1 time in total.
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Re: [Wiki] - Percentage Gain and Loss (for new investors)

Post by itstoomuch » Sun Jun 18, 2017 5:14 pm

Are you getting "new investors" off on the wrong path?
I was taught that investing, one buys shares. If the market goes up or down the value of the shares change but the number of shares stay the same.
In Dollar Cost, you emphasize the number of shares with an ave cost of $dollars.
In a lump sum purchase you emphasize the value of the shares at time of purchase and sale.
YMMV.
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Re: [Wiki] - Percentage Gain and Loss (for new investors)

Post by LadyGeek » Sun Jun 18, 2017 6:52 pm

siamond wrote:
LadyGeek wrote:Do we have a consensus to "go live" and show new investors?
Sounds good to me. Nice work..
OK, we're "live": Percentage gain and loss. This does not mean we are done improving the page. We can certainly continue the discussion and update the page as needed.
siamond wrote:[
dbr wrote:There is also this: https://en.wikipedia.org/wiki/Percentage see especially the section titled "Compounding percentages."
Good point. I always discover new Wiki pages I didn't know about. I guess it should be linked in the See Also section.
As for the Wikipedia page: Percentage - Wikipedia (Compounding percentages), the last 2 paragraphs of this section are unclear. The section mixes interest rates with an example of voting statistics and a discussion of "percentage points". The last paragraph, is "oh, and finance uses something called a basis point." This Wikipedia page is not a good reference and is why I didn't add it to the wiki.
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Re: [Wiki] - Percentage Gain and Loss (for new investors)

Post by livesoft » Sun Jun 18, 2017 6:59 pm

Does anybody want to quibble about the precision of the numbers? It seems many of them are rounded to the nearest whole percent which I suppose might be helpfully noted somewhere.
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Re: [Wiki] - Percentage Gain and Loss (for new investors)

Post by LadyGeek » Sun Jun 18, 2017 7:33 pm

We could quibble about precision, but the point is to be accurate: Accuracy and precision

If there is any ambiguity between results, we could go to another level of precision.

For example, we tell investors they only need to track their asset allocation to the nearest 5%.

Showing a number as 10.000% when you only need 10% will imply that investors need to track their investments to this same level. That is not the intent to be communicated.
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Re: [Wiki] - Percentage Gain and Loss (for new investors)

Post by itstoomuch » Sun Jun 18, 2017 11:57 pm

5%.
Gosh, 95% of retirement expenses every year in retirement will deplete one's retirement assets real quick, especially when the lag is really 91.5% of need :twisted: YMMV :annoyed
Close the thread, Please :mrgreen:
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Re: [Wiki] - Percentage Gain and Loss (for new investors)

Post by GAAP » Mon Jun 19, 2017 10:29 am

Precision is putting all of the bullets/arrows in the center target -- accuracy is hitting the right target.

That's actually a separate topic to consider....

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Re: [Wiki] - Percentage Gain and Loss (for new investors)

Post by LadyGeek » Mon Jun 19, 2017 10:15 pm

LadyGeek wrote:
#Cruncher wrote:
LadyGeek in [url=https://www.bogleheads.org/forum/viewtopic.php?p=3412330#p3412330]this post[/url] wrote:We should be using centinepers (cNp), see this Wikipedia article: Relative change and difference - Wikipedia (Other change units)
I fought the urge as long as I could. But in the end I just couldn't resist. So, reluctantly, here is the table from the Wiki article with columns added for centinepers (1/100 of a neper or cNp):
As an engineer, I'm comfortable working with 10*log10(), which is known as a Decibel. I like the idea and will update the spreadsheets when I can, along with a brief description.
The wiki has been revised to incorporate centinepers: Percentage gain and loss

To avoid scaring away investors uncomfortable with higher level math, I intentionally put the brief description as an Appendix and prominently noted the material is not essential for understanding percentage change.*

All 3 spreadsheet versions (Google Drive, MS Excel, LibreOffice Calc) have a worksheet containing live formulas and a chart derived from #Cruncher's tables. The Google Drive spreadsheet is displayed in the article.

#Cruncher - I reordered two columns in your 2nd table.

How's it look? Wiki editors are welcome to update the page directly.

* Marginal tax rate has an Appendix with a similar notice.
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Re: [Wiki] - Percentage Gain and Loss (for new investors)

Post by #Cruncher » Tue Jun 20, 2017 12:49 pm

LadyGeek in previous post wrote:The wiki has been revised to incorporate centinepers: Percentage gain and loss
... #Cruncher - I reordered two columns in your 2nd table.
How's it look?
I didn't think you'd actually include the tables from my post, LadyGeek. Thank you for doing so. Your column reordering makes the 2nd table better. Looks fine. Only little thing I noticed is the "n/a" in cell K38 of the 2nd table. Unlike the corresponding top-right cell in the 1st table, this one can be calculated with the same formula as in the other rows (=B38+H38).

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Re: [Wiki] - Percentage Gain and Loss (for new investors)

Post by LadyGeek » Tue Jun 20, 2017 7:55 pm

Thanks, I missed that cell. All 3 spreadsheets have been updated.

I also inserted a "See also" reference to Wikipedia's Neper (Applications) page. The explanation of a small approximation becoming exact as a percentage was clear. Also, why only the natural logarithm can be used.

See: Percentage gain and loss
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Re: [Wiki] - Percentage Gain and Loss (for new investors)

Post by TD2626 » Tue Jun 20, 2017 9:00 pm

For the record, I think the article looks great. I especially like the part about nepers.

I think it is quite appropriate to have different sections of articles for those of different levels of knowledge (or for more complex topics, having two articles, akin to https://www.bogleheads.org/wiki/Bond_basics vs https://www.bogleheads.org/wiki/Bonds:_advanced_topics.

I've read many of the wiki articles twice. I read them years ago, when I didn't understand many of the basic terms. And I read them again later after having gained a much better understanding. The fact that the articles have material for a wide variety of audiences is important - especially when someone asks something in the forum about an advanced topic and they need a reference. It's good that there are disclaimers places to tell people that something is an advanced topic.

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Re: [Wiki] - Percentage Gain and Loss (for new investors)

Post by LadyGeek » Tue Jun 20, 2017 10:16 pm

^^^ Thanks.

From an earlier post:
LadyGeek wrote:..Pop quiz: If you add or withdraw money from your investment, can you use "percentage gain or loss" to calculate your return?
The answer is "No", which is explained here: Rate of return

I added the link under "See also": Percentage gain and loss
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