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4% Expected Stock Market Annual Return For The Next Decade?

Tuesday, November 19, 2013 - 4:18 PM

Welcome to the 4% return market - The Term Sheet: Fortune's deals blogTerm Sheet

"4% is not horrible. After the two big stock drops of the 2000s, the market basically went nowhere for the following decade. In a 4% market, with compounded returns, the money you put in the market now will be worth nearly 50% more in a decade.

So while it might not be time to be scared of the market -- the economy is improving -- it's certainly a time to be less excited about it."

This is a more sobering prediction than most.  The comparison to the 1930s era is not an apples-to-apples comparison.  I would think this is the lowest bound.  The reasonable average range can be 4-8%; definitely not 10% (also see the associated comments). 

More importantly, this is a time to consider putting some fund into the stock market depending on one's time horizon and risk tolerance; for the next 4-5 years of low-interest-rate environment.  As they say, "Don't fight (i.e., bet against) the Fed." 

Just my input without retribution:-)

51hh51hh1,476 posts since
Jan 16, 2010
Rep Points: 6,427
1. Tuesday, November 19, 2013 - 4:29 PM
Gripes!  If the stock market can be only 4%, what will that end up being for CDs??   Who would risk their money in the stock market for only 4% unless CD rates were really in the tank worse than they are now?
paoli2paoli21,398 posts since
Aug 10, 2011
Rep Points: 6,129
2. Tuesday, November 19, 2013 - 4:48 PM
True, my RCAs give 4% APY; but it may not last.  The stock market has much higher fluctuations and potentially much higher returns than CDs.  If one has some strategy so that one is not timing the market at the worst time (buy at peak and sell at bottom:D), one can get a pretty handsome return (averaging 8% over the long term is very possible). 

The pros of stock market: potentially higher returns than fixed income IF carefully and smartly managed.

The cons of stock market: bear market is a real possibility; not for the faint-hearted; not for the people with herd mentality.

The best balance: use very conservative asset allocation (i.e., low percentage of equity with high percentage of fixed income) and adopt prudent fund selection/diversification so that one can sleep well every night (bear or bull). 
51hh51hh1,476 posts since
Jan 16, 2010
Rep Points: 6,427