Friday, January 28, 2005

Is 10% Realistic? Part I

This will be a short post, basically a precursor to others that will follow on the topic of future returns from the stock market. I want to make one thing perfectly clear before discussing this topic, I have no idea what returns in the future will be, nor does anybody else. The stock market might return 15% annually for the next 25 years, I highly doubt it, but can't rule it out. Conversely, we may be entering into a time period where our stock market returns less than conventional fixed income products like bonds, fixed annuities, and Certificates of deposits. What I do know is that historically the markets have return about 6.5% after inflation over the past 200 years. The problem is that the 6.5% real return is not guaranteed and doesn't happen in every time period we live in.

I believe that we are in for a period of lower "real," (after inflation) returns than we have enjoyed historically. I don't know this for a fact, but over the coming weeks and months I will give you my reasoning of why I believe that to be so. In the meantime, I invite you to look at one of my favorite websites (and my favorite financial author) William Bernstein authors the site and has written several wonderful books that I encourage everyone to read. "The Four Pillars of Investing" is perhaps the best book ever written on the topic of investing, you won't be disappointed.

That's it for now, stay tuned for more to come and have a great weekend.

Until next time.............