Reply #23: Untrue. [View All]

Now... there's a big difference here between whether we're talking a return NET of inflation or not, but 8% is a very common assumption for a well diversified portfolio (long term).

The people talking about three and four percent are looking at SHORT TERM projections, or they are talking about after-inflation returns.

With dividends, the S&P has returned better than 10% annually (average) over the last 25 years.

You mentioned T Rowe Price as a good example. Their current working assumption for long-term returns is 7% (and since that calculator does not include an inflation adjustment, I assume this is net of inflation - backed up by my nest point).

Here's from their latest newsletter:

"Although the modern S&P 500 wasn’t created until 1957, Standard & Poor’s has extrapolated what would have been the index’s previous performance. For the 50 years ended June 30, 2004, calculations show an average annual return of 11.26%."

"LOOKING AHEAD
Clearly, past rates of return may not be realized in the future. The growth in the economy and corporate earnings will drive the market, and investors can be sure to encounter volatility along the way. Regardless of fluctuations, however, many experienced investors believe that over the long run, the stock market reverts to its historical average—around 10% for the S&P 500—which has helped to preserve purchasing power over time."