🚀 go-pugleaf

In article <slrnb3ph3g.hm.joel-garry@zr1.vista1.sdca.cox.net>, Joel Garry 
wrote in part:
> Don Klipstein ><don@manx.misty.com> wrote:

>>  Real estate will not spend decades on end giving double-digit annual 
>>rate of return.  The stock market will do a little better, although bonds 
>
>Not true about the stock market.  That rate of return is an accounting 
>fiction which does _not_ include write-offs of companies that go belly-up.
>A true rate of return would include that.  Remember, Polaroid was once a
>solid stock.

  Sorry to hear your misinformation, but total USA stock market rate of
return is already discounted for stocks that belly-up.

  Now for what a reasonably expected rate of return should be:  USA annual 
GDP growth plus the reciprocal of average USA stock P/E ratio, however 
appropriately weighted.  Ever since the Industrial Revolution, USA 
economic growth has outpaced inflation by almost 3 percent per year!  Add 
to this the reciprocal of P/E ratio - this yields reinvestment of USA 
publicly-traded corporations into themselves and/or each other - even at
the current/recently inflated 25-30 (compared to historical 15) PE ratio
this means annual rate of return 3.3-4 percent ahead of USA population 
growth and inflation.  Subtract a bit for buyers following the herd and 
buying high, and this still means probably 2-3.5% annual rate of return 
beyond the sum of inflation and population growth.  Detract from that 
increase in the number of competing corporations - but for over half a 
century the 500 biggest publicly traded corporations in the USA have held
a roughly 60-70% piece of the stock-exchange-traded pie!
  Sounds like a broad USA stock index mutual fund should in the very long 
term have an annual total return at least 7-8%, with some mobility towards 
the 9% average experienced even from the 1929 high until now.  Compare to 
real estate price appreciation - how do you project most peaple to have 
such wage growth to afford such a thing?  I do agree that real estate will 
outperform inflation at least a little bit and will probably outperform 
long term trends in commodities, but stocks reinvest profits of businesses 
(or let you do so, mostly automatic with mutual funds) and that means a 
few percent total return beyond the combination of inflation and economic 
growth.

 - Don Klipstein (don@misty.com)