Does anyone still believe that the stock market will once again return an average of 10 percent a year, as it did in the 20th century?
I asked Jim Lund, a Minneapolis-based senior financial advisor for Ameriprise Financial, for his take on the future of returns. He said:
It's anybody's guess. But I do base my future decisions on historical information. I do believe we will revert to the mean... Chances are, yes, history will repeat itself. When that will occur is another question. It's never a straight line. We won't see 10 percent a year for the next 10, 20, 30, 40 years. We might say 5 or 10 percent this year, 20 percent next year, then negative five, plus 10. Even if it's closer to [averaging] 8, somewhere in that range makes me feel comfortable. We use average rates of 8 percent or less for long-term scenarios. We don't want to make unrealistic expectations.
For more, read What If Stocks Never Go Up Again?