The Annual Returns chart sorts the frequency and distribution of every inflation-adjusted annual return for a given asset allocation.  Use this to study just how often a portfolio actually makes the average return it advertises, to visualize the volatility of a portfolio, and to prepare yourself for how frequently even the best portfolio will post an annual loss. 

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Chart

Overview

The Annual Returns chart is a histogram that illustrates the distribution of real-world inflation-adjusted annual returns.  Think of each column as a bucket, and picture going through the historical record and sorting each annual return in the appropriate bucket.  Blue columns represent gains and red columns represent losses. 

While most people think about annual returns in terms of an average, it is important to understand that you almost never receive that average in any given year. By dragging the gray line left and right, you can see how often the portfolio had a real annual return more or less than a certain amount. Visualizing returns this way is helpful for understanding the natural variability of any investment decision.

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