Comments on: Are you using a 10% return for stock market projections? http://advancedpersonalfinance.com/are-you-using-a-10-return-for-stock-market-projections/ Moving beyond the basics Fri, 29 Aug 2008 02:44:28 +0000 http://wordpress.org/?v=2.2.2 By: Q at $1 Million - 5/9/07 spin on the blog carousel http://advancedpersonalfinance.com/are-you-using-a-10-return-for-stock-market-projections/#comment-181 Q at $1 Million - 5/9/07 spin on the blog carousel Mon, 21 May 2007 02:04:14 +0000 http://advancedpersonalfinance.com/are-you-using-a-10-return-for-stock-market-projections/#comment-181 I am quite aggressive with what little money I have, so 10% is achievable for me. I am quite aggressive with what little money I have, so 10% is achievable for me.

]]> By: MossySF http://advancedpersonalfinance.com/are-you-using-a-10-return-for-stock-market-projections/#comment-179 MossySF Sat, 19 May 2007 12:37:06 +0000 http://advancedpersonalfinance.com/are-you-using-a-10-return-for-stock-market-projections/#comment-179 Historic numbers for 1927-2006: Large Cap: 10.41% (S&P500) Large Cap Growth: 9.34% Large Cap Value: 11.54% Small Cap: 12.05% Small Cap Growth: 9.33% Small Cap Value: 14.51% Microcap: ~13% Historic numbers for 1945-1992: Emerging Market: 16% Prorating emerging market to the longer 1927-2006 period will drop the return to about 14% (based on percentage drops for Large Caps & Small Caps). Historic numbers for 1927-2006:

Large Cap: 10.41% (S&P500)
Large Cap Growth: 9.34%
Large Cap Value: 11.54%
Small Cap: 12.05%
Small Cap Growth: 9.33%
Small Cap Value: 14.51%
Microcap: ~13%

Historic numbers for 1945-1992:

Emerging Market: 16%

Prorating emerging market to the longer 1927-2006 period will drop the return to about 14% (based on percentage drops for Large Caps & Small Caps).

]]> By: Lazy Man and Money http://advancedpersonalfinance.com/are-you-using-a-10-return-for-stock-market-projections/#comment-178 Lazy Man and Money Fri, 18 May 2007 23:55:25 +0000 http://advancedpersonalfinance.com/are-you-using-a-10-return-for-stock-market-projections/#comment-178 I used to be on the more conservative side as well. I would go with 5.5% after inflation (8%-2.5%). However, two pieces of information has swayed me. <a href="https://flagship.vanguard.com/VGApp/hnw/FundsSnapshot?FundId=0040&FundIntExt=INT" rel="nofollow">Vanguard's S&P 500 has returned 12+% since 1976 (inception)</a> and JLP of AllFinancialMatters has <a href="http://allfinancialmatters.com/2007/04/06/more-sp-500-index-stats/" rel="nofollow">crunched the numbers himself</a>, using what I believe is the SBBI Yearbook. JLP is a finance professional (I believe), so I trust his calculations. In that he notes that the REAL returns (after inflation) for the S&P 500 were 9.22% since 1926. There are two things to note here. 1) These are significantly long time periods, which is probably a better sample size than say, the last 10 years. 2) It is only the S&P 500 measured. As Samerwriter says, it's not "the market". However, returns on small caps are supposed to have higher returns than large caps (countless sources say this is true, I don't have the time/space to go into it hear) and the S&P 500 has just finally got to the point of topping new highs while the Dow has been doing it for some time. This suggests that the largest caps have outperformed the S&P along with the small caps. Thus while the S&P 500 might not be "the market" it stands to reason that it's in the range of the average market returns. Some things probably perform worse, but there are certainly some things that perform better. I used to be on the more conservative side as well. I would go with 5.5% after inflation (8%-2.5%). However, two pieces of information has swayed me. Vanguard’s S&P 500 has returned 12+% since 1976 (inception) and JLP of AllFinancialMatters has crunched the numbers himself, using what I believe is the SBBI Yearbook. JLP is a finance professional (I believe), so I trust his calculations. In that he notes that the REAL returns (after inflation) for the S&P 500 were 9.22% since 1926.

There are two things to note here. 1) These are significantly long time periods, which is probably a better sample size than say, the last 10 years. 2) It is only the S&P 500 measured. As Samerwriter says, it’s not “the market”. However, returns on small caps are supposed to have higher returns than large caps (countless sources say this is true, I don’t have the time/space to go into it hear) and the S&P 500 has just finally got to the point of topping new highs while the Dow has been doing it for some time. This suggests that the largest caps have outperformed the S&P along with the small caps. Thus while the S&P 500 might not be “the market” it stands to reason that it’s in the range of the average market returns. Some things probably perform worse, but there are certainly some things that perform better.

]]> By: pfblogs.com - personal finance blogs - information on investing, finances, saving and frugality http://advancedpersonalfinance.com/are-you-using-a-10-return-for-stock-market-projections/#comment-177 pfblogs.com - personal finance blogs - information on investing, finances, saving and frugality Fri, 18 May 2007 23:24:58 +0000 http://advancedpersonalfinance.com/are-you-using-a-10-return-for-stock-market-projections/#comment-177 <!--%kramer-ref-pre%-->[...] recently viewed Are you using a 10% return for stock market projections? My latest experience with Electric Orange The Simple Dollar dips his toes into Mutual Funds - a [...]<!--%kramer-ref-post%--> Kramer auto Pingback[…] recently viewed Are you using a 10% return for stock market projections? My latest experience with Electric Orange The Simple Dollar dips his toes into Mutual Funds - a […]

]]> By: F2O http://advancedpersonalfinance.com/are-you-using-a-10-return-for-stock-market-projections/#comment-176 F2O Fri, 18 May 2007 19:21:00 +0000 http://advancedpersonalfinance.com/are-you-using-a-10-return-for-stock-market-projections/#comment-176 I use 8% for the very reason you wrote about. I use 8% for the very reason you wrote about.

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]]> By: Dy (www.dyphan.com) http://advancedpersonalfinance.com/are-you-using-a-10-return-for-stock-market-projections/#comment-173 Dy (www.dyphan.com) Fri, 18 May 2007 16:50:35 +0000 http://advancedpersonalfinance.com/are-you-using-a-10-return-for-stock-market-projections/#comment-173 I'll be using 10%. I think the higher the better. I'm a pretty young and aggressive investor and the higher percentages keep me from being too conservative... not to the point of dumb risks though I’ll be using 10%. I think the higher the better. I’m a pretty young and aggressive investor and the higher percentages keep me from being too conservative… not to the point of dumb risks though

]]> By: MUNTZ http://advancedpersonalfinance.com/are-you-using-a-10-return-for-stock-market-projections/#comment-172 MUNTZ Fri, 18 May 2007 16:23:30 +0000 http://advancedpersonalfinance.com/are-you-using-a-10-return-for-stock-market-projections/#comment-172 Also don't forget the difference between real returns and absolute returns....assumng 2% inflation 12% IS 10%.. To samerwriter - note that being too pessimistic is ALSO a risk. It could lead you to change your debt/equity allocations and thereby give up a LOT of long term gains. For what it is worth I use 7.2% or so, that I lifted from David Swensen. Also don’t forget the difference between real returns and absolute returns….assumng 2% inflation 12% IS 10%..

To samerwriter - note that being too pessimistic is ALSO a risk. It could lead you to change your debt/equity allocations and thereby give up a LOT of long term gains. For what it is worth I use 7.2% or so, that I lifted from David Swensen.

]]> By: KMC http://advancedpersonalfinance.com/are-you-using-a-10-return-for-stock-market-projections/#comment-171 KMC Fri, 18 May 2007 15:51:32 +0000 http://advancedpersonalfinance.com/are-you-using-a-10-return-for-stock-market-projections/#comment-171 Samerwriter, you're right on all counts of course. Samerwriter, you’re right on all counts of course.

]]> By: samerwriter http://advancedpersonalfinance.com/are-you-using-a-10-return-for-stock-market-projections/#comment-170 samerwriter Fri, 18 May 2007 15:29:33 +0000 http://advancedpersonalfinance.com/are-you-using-a-10-return-for-stock-market-projections/#comment-170 I use 6%, because I'm a pessimist. Besides, any figure will be wrong. Likely very wrong. I'd rather be wrong on the low side than the high side. Regarding disparities in past peformance, I think there are several factors: * Saying "the market" returns 12% is a different metric than saying the S&P 500 returns 10% (or 8%). * Some figures include dividends, some include only capital appreciation. * The figures a fund reports probably include expenses (of course those should be low for an S&P 500 fund) * The time frame -- the numbers you were looking at were over 10 years, but that's a pretty short sample. I use 6%, because I’m a pessimist. Besides, any figure will be wrong. Likely very wrong. I’d rather be wrong on the low side than the high side.

Regarding disparities in past peformance, I think there are several factors:

* Saying “the market” returns 12% is a different metric than saying the S&P 500 returns 10% (or 8%).

* Some figures include dividends, some include only capital appreciation.

* The figures a fund reports probably include expenses (of course those should be low for an S&P 500 fund)

* The time frame — the numbers you were looking at were over 10 years, but that’s a pretty short sample.

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