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February 15, 2007


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While the stock market has climbed an average of 10% annually, that is no guarantee that the stock market will grow at that pace over the next 80 years.

Consider the following excerpt that I found at
The article states that the following statements are true:

(1) Returns from 1930-2005 fluctuated around the mean return measured over 1930-2005.

(2) Returns from 2005-2080 will fluctuate around the mean return measured over 2005-2080.

Common sense starts with these facts and leaps to the following conclusion:

(3) Returns from 2005-2080 will fluctuate around the mean return measured over 1930-2005.

However, (3) is not a necessary consequence of (1) and (2). Statements (1) and (2) are true but trivial.

Therefore, whenever I am considering financial decisions, I approach it with a conservative mindset (aim for a 5% annual return in the stock market), instead of banking on 10% returns.

Just my 2 cents.

--Matthew Rosenthal

Why do all of these figure look at the stock market since 1927? Is what happened 80 years ago really relevant to today's market? There have been many changes since then, dollar taken off the gold standard, globalization of the economy. etc. I'd be more interested in the average since 1977.


With a quick look at Yahoo charts for the S&P and a quick spreadsheet it looks like the S&P averaged 9.17% from 1977 to today.


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