Traders quoting annualised returns need I say more. Well, I probably should, one of the things that is most annoying to me is traders who will take a return from a given stock let’s say over a month, and then annualise that return to predict what they’re going to make in the coming year. Intriguingly this is not a mistake that is confined to too amateur investors. It is something I see people who run portfolio services do all the time. They will have a given return for a set time period they will then multiply that up to tell people that this is how much they make per annum. Annualised returns simply do not convey in any way shape or form what the trajectory of a portfolio’s returns will be. To use them to either predict the performance of your portfolio or to use them as some form of marketing is amateurish in the extreme.
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