Updated: February 23, 2017
Looking for a reliable benchmark for stock returns in the next decade?
I’ve got one for you: 7.1%.
I say “reliable” because that’s what the S&P 500 has returned, in price growth and dividends, over the last 10 years. And with that timeframe including the worst crash in living history, we can take it as a conservative benchmark for long-term stock returns for the next decade or longer.
Seven percent is great, especially when you’re only getting 1% in a bank account or CD. But there are two problems here.
The first is drawdowns. Over half of that return comes in the form of price growth, which means it’s a paper gain unless you sell your shares.…