PT - JOURNAL ARTICLE
AU - Alb, Silviu I.
TI - Maximizing Long-Term Cumulative Returns
AID - 10.3905/jwm.2004.391055
DP - 2004 Jan 31
TA - The Journal of Wealth Management
PG - 29--32
VI - 6
IP - 4
4099 - http://jwm.pm-research.com/content/6/4/29.short
4100 - http://jwm.pm-research.com/content/6/4/29.full
AB - Maximizing long-term returns is widely ignored by mainstream financial theory, which focuses mainly on mean variance optimization. To maximize long-term cumulative returns, investors need only maximize the geometric expected return of their portfolio. It is a virtual certainty that over the long-term the geometric expected return will provide an extremely accurate estimate of the annualized cumulative return. A simple mathematical proof is described. Some counter intuitive consequences for investing are illustrated using simple numerical examples. Basic directions to apply the strategy to real life investing are included. Although little known, the cumulative return maximization strategy will likely appeal to down-to-earth investors, due to its sound mathematical foundation, and its meaningful, tangible results.