In a Morningstar post Taylor Larimore noted that: An ounce of higher return is worth more than a pound of lower volatility.That's such a slick observation I couldn't help myself so I ... >You wanted to illustrate it, right? Well ... uh, yes, to illustrate that changes in Average Return are more significant than changes in Volatility. (from 5% to 7%, without changing the Volatility of 24%) and note that the Annualized Return increases by 2% as well ... very nearly On the other hand ... (from 35% to 30%, without changing the Average Return of 11%) and note that the Annualized Return increases by just 1.6% ... very nearly In fact, if the Volatility is v%, we can expect the change in Annualized Return to be roughly v% of the change in Volatility. >Huh?
>I assume you can prove all this, eh?
>Certainly not! Besides, why all those roughly thingys ?
Note that (as Tom C. points out):
>I assume that's roughly true?
Here are a few Volatilities obtained by looking at the Standard Deviation of monthly returns ... then multiplying by SQRT(12) ... and some Vanguard Mutual Funds
