Relationship between Risk, Profitability and Temporary Horizon
The graphs and tables show the evolution in the expected return ranges for the Welzia Sigma 5 (with 5% risk) and Welzia Sigma 15 (with 15% risk) Funds. (Consult the footnote for any doubts about how to interpret the graphs or tables).
Based on the following graphs, and if you had to choose between these two funds, where would you invest your assets if you have a long temporary horizon (for example more than 10 years?)
If your horizon is more than 10 years, you should invest in the Welzia Sigma 15 Fund. For both funds, the probability of obtaining negative annualised returns at 10 years is very low (a 0.12% in the case of Welzia Sigma 5 and a 2.01% in the case of Welzia Sigma 15); however the expected return from Welzia Sigma 15 is much bigger (10.20%) compared with that of Welzia Sigma 5 (4.80%).
Note:The blue line represents percentile 95; there is a 5% probability that the annualised return on the fund lies above that line. The red line represents percentile 5; there is a 5% probability that the annualised return on the fund lies below that line. Consequently there is a 90% probability that the annualised return on the fund lies between the blue and red lines. The grey line represents the expected return from the fund. The tables show the values represented in the graphs. Observe how the annualised return of percentile 5% is positive at 3 years, for the Welzia Sigma 5 and at 7 years for the Welzia Sigma 15.