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I mean Dave Ramsey is horrible, but AAR for the S&P 500 is in fact 10%, it's just that there is a large volatility to returns. Although average real returns ar
by pyromine 10y ago
I mean Dave Ramsey is horrible, but AAR for the S&P 500 is in fact 10%, it's just that there is a large volatility to returns.
Although average real returns are much lower due to inflation, but that's another beast, though arguably more important beast.
- n00b101 10y agoAAR for the S&P 500 is in fact 10% 10% is a wildly high estimate of long-term nominal annual returns on US equities. Please see my comments above.
- threepipeproblm 10y agoHelp me understand... I am seeing this article as showing the median returns for 20-year periods around 4.1%. Are you saying you don't buy the article's conclusion, or is there an apples/oranges thing that I'm missing here?
- em500 10y agoSuppose that you make 20% returns for 8 years straight, followed by 4% returns for 12 years straight. Then your AAR is 10% ((1.2^8*1.04^12)^(1/20)-1), but your median yearly return is 4%.
- OscarCunningham 10y agoThe article accounts for inflation. If you don't do that and you take an average over the entire history of the S&P500 then you get returns of 9.0% annually. That's not so far off from 10%. Not accounting for inflation is fair enough in Dave Ramsey's case since he's all about tying to get people to invest more. Since people's cash is going to be hit just as hard by inflation as stocks it isn't necessary to account for it.