Author - David John Marotta

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

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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