Wealth Added Index (WAI)
Candlefocus EditorThe WAI was developed in the early 2000s as an alternative to traditional measures such as the Sharpe Ratio, which measures the return on investment against the risk taken. The WAI is considered advantageous over the Sharpe ratio as it not only takes into account returns, but also measures how wealth is added or lost while taking risk and opportunity cost into account.
The WAI helps investors compare the impact of different financial strategies on their portfolios. For example, it can be used to determine the return on investments or compare different portfolios over different time periods. It also assists investors in selecting their asset allocation, as they can assess the performance of different portfolios and identify which portfolio is most beneficial for their specific investment objective.
In addition to providing an accurate measure of an asset’s performance, the WAI also accounts for the amount of risk taken and the time value of money. This can be extremely beneficial to investors, as it enables them to assess the potential benefits of different financial strategies, and compare the potential portfolio profits over the long-term.
The Wealth Added Index has become an invaluable tool in the world of portfolio management, as it provides a comprehensive view of an asset’s performance. Investors can use this metric to measure the overall performance of their portfolios, as well as gain insights into the best strategies to secure long-term wealth. It can also be used to compare different investment opportunities, as well as measure the risk taken compared to the returns generated. Through WAI, investors can make informed decisions concerning their investments, ultimately leading to improved portfolio performance.