4 ms·

Covered here: http://www.mrmoneymustache.com/2011/06/06/dude-wheres-my-7-investment-return/ http://www.mrmoneymustache.com/2011/06/06/dude-wheres-my-7-i... Goo

• jerf 14y ago
  One of my favorite infographics ever: http://www.nytimes.com/interactive/2011/01/02/business/20110102-metrics-graphic.html http://www.nytimes.com/interactive/2011/01/02/business/20110... As I say every time I link it, read it carefully; it does not say what most people initially think it is saying when they first see it. In this particular case I bring this up to show that the "standard" 7% over a long term can be optimistic. As it happens that corresponds to the first light green color, and that is not as pervasive as you may have been led to believe. Sub 3% over 20 years is a very realistic possibility. Individual snapshots of that graph can be highly deceptive. The whole is quite interesting and difficult to summarize.
  • praptak 14y ago
    Yeah, it's not that simple and on top of that "historical performance is no guarantee of the future one".
  • jcdavis 14y ago
    That chart takes away inflation. When people say the expect 7%/year they are not including inflation. 7% a year pre inflation and taxes is likely roughtly 3.5-4%, which is grey on that chart.
    • dro77 14y ago
      Yes. This chart goes along perfectly with MMM's math.
  • T-hawk 14y ago
    Yes, great graph. It illustrates the fundamental truth overlooked by most retirement planning schemes: the stock market doesn't just automatically grow in value over time. It grows in emphatically punctuated booms driven by technological advances. The boom of the 1920s owed a lot to the telephone and automobile, linking businesses together in new ways. The boom of the 1960s was mainframe computerization, and the boom of the 1990s was personal computers and Internet connectivity. All these permitted entrepreneurs and established businesses to gain ever larger leveraged multipliers of turning effort into impact and value and wealth. No breakthrough technology means no boom. We won't have another until another such technology arises. The Internet has largely plateaued in terms of business value. We don't have anything obvious on the horizon that will create a 10x productivity multiplier over email or Excel or StackOverflow, in the way that computers replaced adding machines and email replaced snail mail. Judging by the history of industrialized society, something will arise eventually to spark another boom (my best bet is neural-computer integration), but we can't say what or when. The next 20-year quadrupling of the stock market may begin in 2015 or in 2060.
  • sethist 14y ago
    The problem with that graph is that almost no one invests that way. People just don't dump their entire life savings into the market, wait x number of years, and then withdraw it all at once. Dollar cost averaging and changes in investment aggressiveness will likely smooth out those numbers.
• bryanlarsen 14y ago
  He's using US stock market data for his argument. The US stock market over the last 100 years has been an obvious outlier. In that time the US grew from a small fraction of the world economy to dominating it. If you want to make this argument, you have to use global stock market data. Personally, I use 2% after inflation for my calculations, and consider that to be optimistic. There are lots of examples of stock markets returning less than inflation over long term periods.