Comments on: There's no Law of Averages!

By: AJC

AJC — Thu, 26 Jun 2008 05:26:53 +0000

@ Moom – I’d rather not guess, or take chances when it comes to retirement … that’s why I use 8%: 75 years of S&P 500 history suggest that this is the minimum that you can expect with at least a 30 year outlook.

@ Bob – if you want to get rich, I’d say that ANY of the investment vehicles that you suggest are ‘stupid’

@ Di – Exactly!

By: Di Eats the Elephant

Di Eats the Elephant — Wed, 25 Jun 2008 21:04:38 +0000

For those who want to argue about this, consider the following quote attributed to Niels Bohr: “Predictions are always difficult – especially when they’re about the future.”

By: Bob

Bob — Wed, 25 Jun 2008 13:42:31 +0000

Looking at the S&P 500 as representative of the ENTIRE market is stupid. Looking at the Wilshire 3000 as representative of the ENTIRE market is stupid. No one who invests in index funds should be investing in ONLY the Vanguard 500 fund. You want a mix of different assets classes: US Large, US Small, Foreign Large, Foreign Small, Emerging Markets, REITs, US Bonds, Foreign Bonds.

When you put together a mix like that (even if you just divide it evenly among all those asset classes), then your results over any 10 year period will be a lot better than just looking at the S&P 500. Check out http://www.ifa.com for some data to show that.

I just want to point out that you should not look at a single index to represent the returns of the entire market.

By: moom

moom — Wed, 25 Jun 2008 12:46:04 +0000

12% is an overestimate of long-term returns for US large cap stocks, 1976 was pretty much the low for the bear market and then the biggest bull market in US history happened from 1982 to 2000. Yes in the last 10 years the return is 4% including dividends for the SPX. I’d use 10% as the best guess of long-term returns but there is no reason that that number would be maintained. Rates of return in the end depend on the risk preferences of investors and they could change in either direction over time….