# Debunking Dollar Cost Averaging

I was surprised to hear Clark Howard tout “dollar cost averaging (DCA)” again on his national radio show. It seems impossible to reach Clark to ask him where he gets his information or to set him straight. I researched DCA on the Web and on this site, but found no intelligent discussions except for two posted by member APOS in Great Debates for May, 2002.

So I designed a spreadsheet for an imaginary typical stock with a random-walk price increasing at an APR of 7% and tried out the strategy of DCA, making a \$100 investment once a month for ten years, comparing the results side by side with a strategy of buy-low-sell-high (BLSA) and one of buy-high-sell-low (BHSL).

For my purposes, BLSA implies that you buy the stock in any month in which its price has fallen over the past month, and BHSL implies that you buy the stock in any month in which its price has likewise risen, though I imagine any other definition would suffice.

In Excel, I can repeat the experiment once a second by just hitting the F9 key. Surprise! The (averaged) returns after ten years showed no significant variation among the three strategies. I conclude that DCA is a crock and that in a random-walk situation, any strategy is as good as any other! Which is another way of stating the “dart-board” theory, I suppose. It will surprise a lot of folks that I could set myself up as a “financial advisor” and make millions with my breakthrough book entitled, “Buy High, Sell Low!”

The only advantage of DCA that I can see has nothing to do with dollars, costs or averaging – it is that DCA forces you to take the money out of the mattress and invest it in an enterprise. If given the choice between leaving the funds in a CD that pays an APR of 7% or investing it by DCA, BLSA or BHSL, you may as well leave the funds in the CD, especially if there are fees involved in stock transactions. Another consideration, of course, is the differential tax treatment of dividends and interest.

The experiment could be modified to include the options of short-selling or, in the case of BLSA, buying any stock that is down when selling one that is up, or, in the case of BHSL, buying any stock that is up when selling one that is down, so as never to have to park any money in the mattress.

If I had access to historic tax data and the software to analyze it, I would run DCA, BLSA and BHSL on several randomly-chosen stocks. I expect the results to be the same, and would love to see one of you financial “advisors” do it and post a report.

It never ceases to amaze me how otherwise intelligent folks, like Clark Howard, can continue to be taken in by superstition, religion and other nonsense. I’d like to offer my Top Ten general investment principles, and welcome anyone to present a cogent argument disputing any of them:

1. Keep your money out of the mattress and invest it.
2. If you won’t or can’t invest it, spend it all right away on education, entertainment, travel, food and booze; the number of sad investors in NYC is exceeded by the number of happy beach bums in Rio.
3. Invest in enterprises that bear the highest risk you can stand.
4. Appreciate that diversification in investment brings no financial benefit, just as tossing one die ten times gives the same result as tossing ten dice once.
5. Understand that no investment strategy is better than any other, unless you have inside information, and if you have inside information, use it.
6. Avoid transaction fees as they can swamp any differences among investments.
7. Realize that a strategy of avoiding taxes is the paramount consideration in earning, spending and investing.
8. Focus on spending your money wisely, which will improve your life more than focusing on earning it or investing it.
9. Ignore all financial advice except the above, especially if you have to pay for it.
10. Die broke.

I’ve always thought of DCA as a way to keep people who are in a periodic scheduled investment plan (which is probably the wrong description–I’m talking about stuff like my monthly retirement contributions) from hyperventilating when the market goes crappy.

I mean, there were some months there where I simply wasn’t opening my retirement account statements because they were depressing as hell. What was nice to know, however, was that low value = high number of additional shares each and every month. When the market stops sucking, I got lotsa shares to take advantage of the rebound with. Without thinking about it that way, I might have been tempted to decrease my contribution, or fiddle with my distribution in an uninformed and counterproductive way.

Maybe the whole Dollar Cost Averaging concept is just a balm for the marginally informed person who is making regular payroll deductions into a managed fund. Like myself.

What do you mean by this? I think you may be on to something that I agree with, but I’m not sure exactly what you mean by “diversification in investment.”

If the goal of your set of rules is to provide a roadmap that any ol’ Joe or Jane off the street can use to invest for retirment properly, then I think it can be greatly simplified by just advising people to invest in index funds. The folks at the Motley Fool are into some crackpot stuff (like telling people to use the number of cars at malls as an economic indicator), but they do a good job of getting the message out that an index fund is a much better way to invest in equities than is a managed mutual fund.

Yeah, I don’t know about this one, and I do understand what you’re saying. I just think that the risk of outliving your money outweighs the advantages of dying broke. Another way to say this is to “die with an amount of money below the estate tax exemption after you gave away as much as you could during your life without paying gift tax,” but it loses a bit of punch.

Well, you’re really buying high and selling higher, which others have used as a mantra to sell books.

I am confused by this. I thought that diversification meant you are tossing the dice 10 times instead of once.

[qoute]In Excel, I can repeat the experiment once a second by just hitting the F9 key. Surprise! The (averaged) returns after ten years showed no significant variation among the three strategies. I conclude that DCA is a crock and that in a random-walk situation, any strategy is as good as any other! Which is another way of stating the “dart-board” theory, I suppose. It will surprise a lot of folks that I could set myself up as a “financial advisor” and make millions with my breakthrough book entitled, “Buy High, Sell Low!”
[/quote]
It is not the average returns that are important it is the distribution of returns. Do the DCA returns cluster closer to the average than the non DCA returns.

The real question is does DCA minimize your risk.

“Appreciate that diversification in investment brings no financial benefit, just as tossing one die ten times gives the same result as tossing ten dice once.”
Well, diversification will reduce the risk for a given return or increase the return for a given risk. I think that counts as a “finanical benefit”.

In number 4 the assumption is that there is no positive expected value. If that’s the case, you shouldn’t be investing anyway. Number 5 is all wrong for the professional trader but true for both the average investor working for himself and those “professionals” who the average investor has access to.

DCA is really about investing compliance. Rather than have people bail on the first sign of a down move, put it in their heads that now they will actually be able to buy more with the same investment.

Jimbino:

You’re only examining one scenario on your spreadsheet. Your scenario best emulates the actions of bonds. Equities on the other tend to trend.

With a stock that more or less goes up over time, DCA is no big deal.

However, DCA protects you from long downtrends in whatever it is that you’re buying.

For example, let’s say you buy XYZ stock at \$10 a share for a hundred dollars, and you spend another \$100 a month for the next 100 months.

Let’s say for the first 50 months XYZ stock drops more or less linearally from \$10 to \$5 and then returns in linear fashion ending the exercise back at exactly \$10. By dollar cost averaging you’ve just made a boatload of money on net stock action of nil.

Buy dollar cost averaging you tend to buy more shares when the price is low and less shares when the price is high. For it to be advantageous you need a protracted downtrend. This downtrend is what DCA is protecting you from.

Other than that DCA does a good job obfuscating cost basis.

I recommend keeping a reserve on hand that will last you several months rather than perpetually walking around broke.

Bad idea. Asset classes tend to move as wholes. If you decided in January of 2000 that you could absorb a lot of risk and dumped everything into small cap growth you got wiped out. If you were spread out among asset classes and had some bonds, they would have gone up dramatically. If you were smart you could have sold those low-risk investments and bought more smallcap growth at the bottom last October and made a killing.

This is completely false as my illustration above shows. If you are diversified according to proper asset allocation and modern portfolio theory you will tend to reallocate by selling highly appreciated asset classes to purchase poorly performing asset classes. In other words you will be selling high and buying low to maintain your allocation.

If you think diversification sucks, take all your money go to Vegas and play one hand of blackjack. If you win, let it ride, and keep playing.

Come see me after a couple of hands when you’re busted and tell me how you don’t need know diversification, kay?

Untrue. Investment strategies are tools. Some tools are better than others. Take for example your strategy of total nondiversification. As a tool for investment it sucks monkey ass compared to asset allocation.

If you use inside information you will probably get caught and go to jail.

There are always transaction fees. TANSTAAFL.

Interesting theory. Let’s test it. To avoid capital gains let us by vast quantities of stocks that go down. By losing money we avoid taxes. Now we’re out of money, but hey! Look! No taxes.

Again, a bad idea as easily demonstrable. Balance is required between earning and investing and spending. If I follow your advice then it would be ok to run up my credit card to improve my “quality of life”

Free advice is usually fairly valued.

How? Should you just kill yourself when you run out of money? If not, then how do you propose figuring out exactly when you are going to die and adjusting your spending rate to coincide?

My birth certificate didn’t come with a… Wait for it… expiration date. Did yours?

If I plan on dying at 70 but live to ninety my sunset years will suck if I follow your advice.

I always thought dollar cost averaging worked better under the assumption of an economy that, overall and over time, was growing. I don’t believe it is a general assumption that the western world’s economies are random walks.

7% CD??? Where??? Sign me up!!! I’m currently seeing 1.5% 12-month CDs advertised.

Buy-low-sell-high? Sure, it’s simple to do looking back at historic prices, try doing it from now into the future: How do you pick the low? How do you pick the high? DCA takes the guess-work out of it, you buy more shares at a low price, and less shares at a high price.

1. Keep your money out of the mattress and invest it.

(This really depends on your financial situation. If you own 3 houses, 2 profitable businesses and a big boat, you don’t need to risk losing your cash in other investments.)

1. If you won’t or can’t invest it, spend it all right away on education, entertainment, travel, food and booze; the number of sad investors in NYC is exceeded by the number of happy beach bums in Rio.

(“Spend it all right away”? No thanks. Enjoy yourself but don’t spend your “happy cushion”. The second part of your statement is probably true though)

1. Invest in enterprises that bear the highest risk you can stand.

(There seems to be very few people that actually know their risk tolerance. People that are well-seasoned investors generally know their risk tolerance, but then again, not many people are well-seasoned investors.)

1. Appreciate that diversification in investment brings no financial benefit, just as tossing one die ten times gives the same result as tossing ten dice once.

(You may be right if you are talking strictly about securities investment. But owning real estate, businesses and other property along with financial securities seems to be a good diversification plan.)

1. Understand that no investment strategy is better than any other, unless you have inside information, and if you have inside information, use it.

(Although investing with inside information is illegal, it is done on Wall Street every day. I think the best advice I have heard in this area is, invest in what you know and understand.)

1. Avoid transaction fees as they can swamp any differences among investments.

(Very true, shop around for the best deal. Be very careful about believing anything a financial institution tells you, they are famous for changing the rules the day after you sign up.)

1. Realize that a strategy of avoiding taxes is the paramount consideration in earning, spending and investing.

(Good point, any time you can potentially make a profit, think about the tax implications.)

1. Focus on spending your money wisely, which will improve your life more than focusing on earning it or investing it.

(Bingo!!! Don’t spend over your head. There are lots, and lots, and lots of things you really don’t need.)

1. Ignore all financial advice except the above, especially if you have to pay for it.

(Well I don’t ignore financial advice, I just chew on it.)

1. Die broke.

(To hell with that, die in debt!!!)

If you’re cryin’ you should be buyin’
If you’re yellin’ you should be sellin’

First, good advice from Scylla. Pay attention!

Second,

The rates do suck, don’t they? But if you can leave your money parked for five years or more, check out I-Bonds, which are inflation-indexed, free from state and local taxes, federally tax-deferred, and currently paying 4.66% (the rate will get reset on Nov. 1). Even if you pull them out in less than 5 years, you only lose 3 months’ worth of the interest.

You can buy them online by having the money electronically drafted out of your checking account. It took me all of 5 minutes to sign up, and by the next morning, the purchase transaction was completed. There’s a good Treasury website that explains it all.

jimbino

As gazpacho said, the purpose of DCA is not to increase the expected gains, but to decrease the risk. This is often poorly explained; for instance, when Suze Orman discussed DCA, she presented a case in which DCA resulted in a profit. Not only was it deceptive in that she picked the numbers specifically so that DCA would result in a profit, but in doing so she implied that that was the purpose of DCA. DCA is a way to diversify through time.

Scylla

Sure, but if you knew that the stock was going to do that, you would have been even better off buying only at the \$5 mark. And if the stock rises, then falls back to the same level, DCA will lose you a bunch of money; buying only at the beginning or the end would have been better. DCA is a mix of these two strategies, with the same mean but lower standard deviation.

While the rule as stated makes little sense, I see a nub of truth which may be genesis of this belief. There are basically two ways that someone can “beat” the market: special knowledge, and special preferences. Most people aren’t going to have much in the way of special knowledge, so that leaves special preferences. Tax considerations can be a major source of special preferences, so it is possible to profit if one’s tax situation cause one to have preferences which are significantly different from the general market. However, it is indeed a mistake to think that one’s optimal tax level is zero, or even lower than one’s current level. It is quite possible that one would be better off paying more taxes.

Erislover

The price of a stock includes the market’s estimate as to how much the economy will grow. Therefore, if the market is correct, dollar cost averaging will yield no benefit. If, on the other hand, you have special knowledge that the economy will grow, dollar cost averaging is worse; the price of the stock will go up as people start to catch on that the economy is growing, and you would have been better off if you had bought as much you could at the earlier, lower price. And if you have special knowledge that the economy is shrinking, dollar cost averaging is again not the best choice, as you could just save up your money and buy once the price goes down. DCA is guaranteed to be neither the best nor the worst strategy.

CrankyAsAnOldMan,

You are right that the one beneficial effect of DCA is that of forcing the guy getting a regular paycheck and having regular expenses to refrain from putting his money in the mattress. It does not work for the person who suffers an unusual windfall or setback in a given month or for the person who gets irregular income. That person would be well advised to invest nothing in the lean months (when he may have to borrow money!) and bundles of money in the fat months, totally disregarding DCA.

But the business about “lotsa shares” is a canard. The number of shares purchased is merely a fiction useful for bookkeeping purposes. What you do care about is that you invested \$100 every month since 1980 that is now worth \$1 million. Who cares how many shares you bought over the years and how many times the stock split and how many shares you now own? If the stats say that your single dollar invested in the market in 1923 grew at an APR of around 7.2% from then till now, they tell you that your 1923 dollar is now worth about 2**8 or 256 dollars (rule of 72); the number of shares you now own is irrelevant!
TaxGuy,

Yes, I agree it’s wise to invest in an index fund for a couple of reasons: fees are low and you don’t have to buy a \$1.00 WSJ or go online every day to check up on the value of numerous stock holdings. Depending on the index fund, you can get all the info you need by hearing it on NPR. (Which brings up a longstanding complaint of mine: the news always reports how much an index is up or down for the day, and only sometimes reports what its value is. A Rip Van Winkle waking up and hearing the usual report would have no idea if his investments had made him a prince or pauper! But any person who knows what he paid for an index holding would know his instantaneous worth if they just reported the current value of the index and forgot the up/down nonsense. Which reminds me of another beef: The reporters like to say, “The Dow lost 100 points today on news that General Electric …” How the hell do they know what made the Dow move? Furthermore, it could well lose only 100 points on good news if the expectation was for bad news that would have cost 200 points, so that most people would conclude that what was in fact good news about GE was bad news!)

When I say that diversification confers no financial benefit, I do not rule out that it can bring a “psychic” benefit, if that’s what you’re into. It’s like placebo, praying or going to mass: it brings no objective benefit whatsoever but can put a smile on the face of the true believer who meets his soulmate at mass. Consider simple examples: I place before you two boxes, one with four nickels and the other with two dimes and two plug nickels. The sacks are indistinguishable and the contents worth the same, and you get to reach in and blindly pluck two coins from one sack or one from each sack after paying me 1 cent per sack opened (transaction costs). Would you diversify? If you do, you might win, but the chances are that you will lose, so that diversification is a bad strategy (statistically, it brings a loss).

Or put all the women in the world are in two blind sacks. You can reach in and grab your soulmate from either one or grab one from each sack and average their qualities. If you have to pay to open a bag, again you lose if you diversify.

Another example: a high-risk kind of gal goes off to climb Everest but makes sure her homeowner’s insurance is paid up. This is foolish behavior, but extremely common among Americans.

As far as investment is concerned, if you are a person who can stand only moderate risk, you are better off putting all your money in a moderate-risk index fund than you would be putting some in a high-risk fund, some in government bonds, and the rest in a savings account, because of the fees and transaction costs.

Thus I say: while diversification never brings an objective financial benefit, it always brings a loss, if there are transaction costs. This has to be understood in a statistical sense, of course.

Motley Fool apparently has it about right: if the market is efficient and you have no inside information and there are no transaction costs, every strategy is as good as any other, including that of basing your buy/sell decisions on the number of cars at the mall!

There are several ways to die broke. One is to spend your last nickel every day, as most of the world has done for eons. Another is to sell off everything and rely on a lifetime annuity, which is normally purchased from an insurance company, making it as bad a deal as insurance. Better is a private annuity that you seal with a friend, offspring, nephew or niece, who sends you a check every month and ends up with your property when you die. The best would be a vast Tontine, which unrelated folks could buy into like a mutual fund. It is so sensible that, of course, the government outlawed it a long time ago.

You say that my BHSL strategy is “really buying high and selling higher, which others have used as a mantra to sell books,” but that is not true, for a couple of reasons. Using BHSL, you would never sell if the price always went up month to month and might well sell lower if the price goes down the first month!
gazpacho,

My spreadsheet calculations show that DCA brings the same result as BHSL and BLSH, and thus can be said to be no more or less risky than any arbitrary strategy. Diversification can certainly lower risk, both the risk of losing all and the risk of getting filthy rich, just like averaging two tosses of a die gives you a 1/36 chance of going broke (scoring 1) and a 1/36 chance of wealth (scoring 6), whereas the chances with one die are of course 1/6 for poverty or wealth. In both cases, the expected outcome is 3-1/2, so the choice between diversifying or not is a wash as far as “average return” is concerned.

In investing, rational folks concentrate on maximizing the return. Superstitious, religious and fearful folks concentrate on minimizing risk, which, in the real world always interferes with maximizing life, love and wealth. Insurance is a perfect example. The only rational behavior (unless you have inside information) is to “go bare.” It is fear and superstition that drives folks to take a expected hit as high as 80% loss (in the case of car insurance) or 40% loss (in the case of flood insurance) on every premium dollar spent. Check out the stats on the FEMA flood insurance website! Only wimps, fools and those with inside information voluntarily participate in any kind of insurance!
CyberPundit,

Diversification will indeed reduce the risk for a given return, both the risk of loss and the risk of gain. But you lose if diversification implies transaction (or information) costs. I think you need to explain how there can be a financial benefit in diversification, unless you can show that a strategy that statistically leaves you slightly less wealthy, handsome and intelligent than the person who can expect to gain his average qualities from a dart board confers a “benefit.”
KidCharlemagne,

I agree with you that DCA is about investing compliance, no more, no less. So why don’t they just call it something like “regular monthly investing (RMI)” instead? I suppose that the reason is that financial advisers, who have nothing to say, have to say it using magical words, otherwise the public might catch on to their less-than-worthlessness.

I don’t agree that “Number 5 is all wrong for the professional trader,” unless by “professional trader” you mean someone who can move a market or has inside information. Professional boxers, for example, statistically lose exactly as many times as they win, and when a bear is chasing you in the market, you not only have to run faster than the other guy, you have to run faster than all the other guys, because of the effect of arbitrage. It was my own cousin, along with Nobelists Merton and Scholes – professionals all – who managed to lose more than \$4 billion while having upward of \$2 trillion in play in the arbitrage game.
Scylla,

You sure are right that DCA serves to obscure cost basis, but you are wrong about the rest. Here’s what happens in other scenarios:

1. Long downtrend: DCA is no better than BLSH, and both are much worse than the mattress.
2. Long uptrend: DCA is no better than BHSL.
3. Linear drop to half-value, followed by linear rise to full value: DCA beats BLSH, but loses to BHSL.
4. Linear rise to twice-value, followed by linear fall to initial value: DCA beats BHSL, but loses to BLSH.

Of course there are scenarios innumerable, but I maintain that, unless you can see the future, DCA has no advantage over any other investment strategy (except the null strategy of the mattress).

Your analysis of what would have been the best strategy in January of 2000 doesn’t merit the wasted ink, since hindsight is of no value in investing, unless and until you can invest in the past! In any case, if you could invest in the past, diversification would NEVER be the best strategy for ANY period. And as far as Vegas is concerned, are you asserting that diversifying by placing a bet on roulette and one on blackjack is better than two bets on blackjack? There are a lot of blackjack players who can beat the expected return of around 95% for roulette. It is a truism, however, that if people were able to put their monthly social security premium on a spin of the roulette wheel instead of into the gummint Ponzi scheme and invest what’s left over with DCA, they would end up between \$1 million and \$2 million richer after 45 years of working life, have a lot more fun, and have something to leave their families.

Asset allocation is worse than non-diversification for the investor, but much better for the financial advisor, so I’m afraid we’ll be hearing about it, ad nauseam, for a long time to come. Inside information is traded on all the time and you probably will not get caught and not go to jail. It is not immoral and The Chicago School recommends that the criminal sanction be abolished.
ErisLover,

The truth of my analysis of the value of DCA, compared with competing strategies, does not depend on the assumption of the random walk, but instead on the assumption that the investor has no idea what month-to-month price movements any particular stock or index will experience. Indeed, even the assumption of a long-term rise in the value of the general market is untenable, to the extent that it is based on historical data rather than a trust in the positive value of enterprise. In the absence of that trust, you are well advised to get out of the market altogether and rely instead on the mattress or instant gratification, since transaction costs will eventually eat you up.
ccwaterback,

You need to put your glasses on if you read me to say that I have found a CD that pays 7% today. As far as my BLSH strategy, you will see, once you get your glasses on, that I have defined the “high” and the “low” and any fool could use my strategy prospectively. And there must be a 12-point program to help you overcome your fixation on the number of shares a person owns.

Let’s use the following table to represent the price of XYZ stock on the first day of each month from January 1st 2001 to January 1st 2002.

9.01
9.02
9.03
9.04
9.05
9.06
9.07
9.06
12.00
14.00
16.00
18.00
20.00

On January 1st, 2002:

DCA you have 115.75 shares @ \$10.37/share giving you a profit of \$1115.07
BLSH you have 11.04 shares @ \$9.06/share giving you a profit of \$120.75

So you subcribe to Random Walk? Academics have been back-pedaling for years explaining how they could have been wrong about that one. I’m not sure how the boxer analogy applies here, though it might apply to number 4. If you want to elaborate, I’ll comment. I can say that as a professional trader I’m “wrong” on any given trade more than 50% of the time, but I’m going for a minimum of 3 to 1 reward/risk. The boys at LTCM were professional traders but they didn’t act like it. I knew the guys over there and can safely say that their downfall was a textbook example of success, begetting hubris, begetting ignoring principles of managing risk, begetting slaughter.
Don’t get me wrong. I don’t think that 99% of the population has the mindset to beat a monkey and a dartboard but that leaves 1% who can.

OK, I don’t belong here, I am a trader not an investor. If I own 10,000 shares of a stock that goes up 25 cents, I make \$2,500, if I own one share I make \$0.25. As a trader, the number of shares makes a world of difference to me.

Jimbino:

You can’t implement your counter strategies unless you can see the future. DCA is not intended to compete against strategies that involve time travel.

Nonsense. I was simply back-testing your strategy to see if it would have worked. It would not have.

I would define best as the strategy that is most likely to produce the required return for any degree of risk. Modern Portfolio Theory mathematically demonstrates why diversification is necessary. As N (the number of noncorrelated investments with the same recquired return increases) the standard deviation to that return decreases.

No. That bears no resemblance to what I said. Your strategy of nondiversification can be stated as placing everything on a single hand of blackjack.

I am stating that dividing it between multiple hands or games will reduce your chance of getting busted.

For example. Let’s say we each have \$100 dollars, and are required to play 10 hands of blackjack. For argument let’s say blackjack gives you a 50/50 chance of doubling your money on each hand.

A totally nondiversified strategy would be to bet it all on the first hand, and let the winnings (if you won) ride through all ten hands.
At the end of ten hands you will have either \$102,400 or nothing. Your chances of having the money also hapen to be 1 chance in 1,024.

If on the other hand I diversify and place \$10 on ten seperate bets, the most likely outcome is that I will end with \$100. On the two extremes I might lose everything or I might double my money. Each of those extremes has a 1 in 1024 chance of occuring. The large bulk of the probability curve places my finishing money very close to the \$100 mark. The further away from that, the more unlikely.

Again, mathematically this is false. Asset allocation has a higher probablility of producing an expected return through diversification than nondiversification as is mathematically demonstrated by Modern Portfolio Theory…

You’ll need to back up both these assertions.

Whoops I meant to address this too. There is a big psychological difference to someone who invests the same amount of money monthly in a stock that is going down because “that’s the plan” vs. someone who can rationalize to themselves that “now I can buy even more shares with my money!”

It seems to me that it’s your belief that risk tolerance has no place in investment, that absolute return is the only metric by which to determine investment success, that life insurance is totally useless and a con game played upon the mentally weak, diversification is useless, and buying only index funds is the only answer for everybody, all the time.

I wouldn’t let you within 100 yards of my money.

Wrong. Investing folks seek to maximize risk adjusted returns. You cannot ignore the risk adjusted. Average return is just one number you need to understand the distribution of possible returns.