Archive - April 2, 2019

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Don’t Fall for Common Financial Myths
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Q&A: What is the Average Real Return of the Stock Market?

Don’t Fall for Common Financial Myths

Forbes discusses “10 Common Financial Myths That Should Be April Fool’s Jokes” and now that the first of April has passed, we hope that you will consider some of what they say and not take it as a joke.  It isn’t about doing the exact opposite of what everyone says; rather it is about making financial planning choices that work for you. Dump stocks when the market is down. The market will go up and down; it can’t continuously go up and up. If you have chosen well and haven’t invested all you have, you can decide… Read More

Q&A: What is the Average Real Return of the Stock Market?

I recently received the following reader question:

In “Appreciating Assets Part 1: Stocks and Bonds,” you wrote, “On average, equity investments appreciate at a rate of 6.5% over inflation.”

Can you please let me know on what study this is based? As I read the historic equity risk premium is about 4.6%, substantially lower, and this would have a huge impact on your draw down rates.

Many thanks!

There is a difference between “equity risk premium” and “real return over inflation.”

The historical equity risk premium is the return of equities minus the so-called risk free rate of

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