Hope is not a strategy. That’s important to remember, since many of us—most likely, unconsciously—are extrapolating the past decade’s stellar stock market returns into the future. It’s very unlikely we’ll be that lucky: Over the last decade the stock market has beaten cash by 11.9% annualized—one of the best 10-year returns in U.S. history.
Believing in a repeat performance represents a triumph of hope over experience. Of course, it’s not impossible that the stock market’s return over the next decade will be as good as the last decade’s. But possibility is different than probability. And you should be basing your retirement financial plans on realistic assumptions, since the equity market’s long-term return is perhaps the single most important determinant of your retirement standard of living. I am not the first to argue that the next decade is unlikely to be as good as the last, since the current stock market is overvalued according to almost every valuation indicator. But a new analysis reaches a similar conclusion from a different angle: It takes a bottom-up approach to estimating the stock market’s likely next-decade return, decomposing the market’s excess-of-cash return into four distinct components. …
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Believing in a repeat performance represents a triumph of hope over experience. Of course, it’s not impossible that the stock market’s return over the next decade will be as good as the last decade’s. But possibility is different than probability. And you should be basing your retirement financial plans on realistic assumptions, since the equity market’s long-term return is perhaps the single most important determinant of your retirement standard of living. I am not the first to argue that the next decade is unlikely to be as good as the last, since the current stock market is overvalued according to almost every valuation indicator. But a new analysis reaches a similar conclusion from a different angle: It takes a bottom-up approach to estimating the stock market’s likely next-decade return, decomposing the market’s excess-of-cash return into four distinct components. …nnDiscussion:nn” ai_name=”RocketNews AI: ” start_sentence=”Can I tell you more about this article?” text_input_placeholder=”Type ‘Yes'”]