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.
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 …Read More