Stock market performance – how much to expect

Article Excerpt

Long-term studies show that stock market performance as a whole generally produces total pre-tax annual returns of 10% to 11%, or around 7.5% after inflation. Returns will vary widely from year to year, of course. But I think the market will generate average annual compound returns of 10% to 11%, or 7.5% after inflation, over the next couple of decades as a whole. In contrast, fixed-return investments are likely to provide returns of 1.5% to 3% or so above inflation. In short, if you can live with the higher volatility and risk in the stock market, then it beats fixed-return investing for just about any long-term investor. All in all, I still feel that most investors should hold the bulk of their portfolios in high-quality, mostly dividend-paying stocks balanced across the five economic sectors — or in mutual funds that hold those stocks. Secondly, I believe that you will show better long-term results if you stick with my three-part program: 1) Invest mainly in well-established,…

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