What’s the average return you can expect on your investments?
Talking about averages can be tricky.
In every part of the country, you can find a statistic for average annual rainfall. The nation’s capital, for instance, receives an average of 70 centimetres per year. But this statistic can be very misleading.
Consider for a moment that on just one extremely rainy night in September of 2004, more than 135 millimetres of rain fell in Ottawa, skewing the numbers accordingly.
Clearly, the average annual rainfall figure isn’t always accurate. The bottom line: An average of any kind has little meaning if you don’t know the standard deviation, or variability, of the numbers that comprise the average.
The average returns of the stock market are similar to those documenting average annual rainfall. Depending on whose numbers you use, the S&P 500 index has returned, on average, close to 10% annually over the past 80 years. In any given year or shorter time period, however, your returns will vary based on market performance and asset allocation.
So, how do you determine what you might see in the future? There are no easy answers, but following a disciplined investment process and not chasing the latest investment fad will reduce the chance of buying investments at their peak value and thereby avoid crimping your potential returns.
It’s all about diversification. The S&P 500 has really offered only modest returns over last 10 years. Despite this, long-term investors have still been rewarded over time with more positive years than negative ones. But you still want to err on the side of caution when planning.
And remember, an investment in a total bond market index would have offered more positive returns over the same time frame, reinforcing the need for a balanced approach.
When planning for the future, I envision a 4% average stock market return. If I get closer to the 7 or 8% that I hope for, that’s great ... but I’m not going to count on that.
How conservative are you when looking ahead? What's your 'magic' number for future returns?
By Gordon Powers, MSN Money
Posted by: Mike | Jul 28, 2021 4:14:03 PM
I expect an average return of 10% in the Future.
I invested all i could during the recession otherwise I'd be hoping for 7-8%
Posted by: Zionist media control | Aug 5, 2021 8:20:52 PM
When I had a fairly large amount of money from a deal I'd worked on for a long time I decided to invest with Assante (Wealth Management). My "advisor promised me about 6 to 7% annually, when my mortgage was around 4%. I was a little skeptical, so I decided to pay off my mortgage and invest he rest with her. after about two years of 6%, I lost over 40% in the recent crisis. I'm thanking God that I not only paid off my mortgage but also recently bought a rental property. Invest in REAL ESTATE for RENTING not speculation and you'll make well over the market returns because not only is your property being paid down for you, property values are also going up.
The stock market and mutual funds are for insiders, gamblers and suckers.
Posted by: Jack | Sep 5, 2021 1:06:12 PM
The 4% level is a good number to plan on. People who expect 8 to 10% (or more) are greedy and likely the ones that contribute to the economic problems to begin with.