Here's the WSJ's Intelligent Investor laying it out:
What are we smoking, and when will we stop?Read the whole thing. I don't think anyone's terribly bullish these days - but as we dig out, it's good to think in realistic terms.
A nationwide survey last year found that investors expect the U.S. stock market to return an annual average of 13.7% over the next 10 years.
Robert Veres, editor of the Inside Information financial-planning newsletter, recently asked his subscribers to estimate long-term future stock returns after inflation, expenses and taxes, what I call a "net-net-net" return. Several dozen leading financial advisers responded. Although some didn't subtract taxes, the average answer was 6%. A few went as high as 9%.
...in order to earn 6% for clients after inflation, fees and taxes, these financial planners will somehow have to pick investments that generate 11% or 13% a year before costs. Where will they find such huge gains? Since 1926, according to Ibbotson Associates, U.S. stocks have earned an annual average of 9.8%. Their long-term, net-net-net return is under 4%.
All other major assets earned even less. If, like most people, you mix in some bonds and cash, your net-net-net is likely to be more like 2%.
(H/t to Felix Salmon)
1 comment:
It's really simple. I just plug in my Infinite Improbability investment drive and Viola! Sort of a mix of that and the SEP(someone else's problem) economy cloak.
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