Thread: TSP numbers do not add up

You don't add the monthly returns. You must multiply them to get thecompounding effect. One uses this formula: (1+M1)x(1+M2)x(1+M3)x ...x(1+M12) = 1.2714 (Yearly Return). Where Mn is the monthly return expressed as decimal. A positive monthly return looks like 1.0078 for +.78%, or 1.0234 for +2.34%. A negative return month ends up looking like 0.9922 for -0.78%, or 0.9766 for -2.34%. Does this explain how if adding you get 24.98%, but if you multiply the monthly returns you get 27.14 (or 1.2714)?