In today’s Skinny, we are reminded of the simple fact that returns are multiplicative over time, not additive over time. Specifically, this means they follow a Geometric Return Sequence. This is important because it highlights several important aspects of our portfolio returns.
First, there is no reset button - there’s always a running tally. Second, the tastytrade philosophy of smaller, more consistent wins over time can produce significantly positive results. And third, thethe more susceptible you are to larger portfolio drawdowns, which can be difficult to recover from.