Sunday, January 13, 2013

Update on Rates of Return

I just realized that I'd been computing the rate of return over the last 10 years incorrectly in earlier versions of this chart that I'd posted. The new calculation increases the variance a bit - so low and high returns are lower and higher than before. The graph only goes to the end of December. The rate of return over the last ten years was almost 10%. So far this month we are now over 10%. But these returns from the end of the tech crash market slump in 2002. Going forward, returns will fall again so that 6% seems like a more realistic long-term RoR. At the moment 2-3% is a realistic return for the S&P 500. Yes, that includes dividends. Of course, at some point this decadal bear market may end and a new bull market become apparent and RoR increase.

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