Potential Future Securities Earnings

Stocks have returned about 7% above the rate of inflation for the past two hundred years. And in twenty year periods, they have outperformed bonds about 90% of the time.

                       

However, these statistics conceal important facts. Someone who had invested at the market peak in 1929 would have had to wait until 1998 to reach a return of 10% on their money. That would include dividends. This is an after-inflation yearly return of 7%. Actual returns will differ greatly, depending on the time you actually begin investing in the market.

                       

An S & P 500 investor from 1929 through 1949 received an after-inflation return of about 4.5%. An S & P 500 investor starting in 1932, and holding on until 1951, received an after-inflation annual return of about 10.8%. That works out to over 6% more per year.

Luck and chance with regard to time of market entry plays a major

role, so be mindful of the danger of relying on averages.

Investors are lulled into complacency with the false knowledge acquired about “average” returns. They hear what securities have earned on average going back years, and they then project the figures into the future.(See the Earl J. Weinreb NewsHole® comments and @BusinesNewshole at Twitter.)