Quote:
Originally Posted by Hefe
If you can show me the market investment that pays 8%/mo for 15 years I'm in!
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Do you not ever research mutual funds on Morningstar.com? Now, if you're looking for a bank account or some other guaranteeed investment, then no. You're not going to find that. Guaranteed and safe investments are low return, by definition. The risk with this is they won't even keep up with the rate of inflation. Trailing the inflation rate by 1% really adds up over a 15 year period. Just off the top of my head, here are some mutual funds with trailing 15 year returns at or above 8%.
Parnassus Core Equity: 10.05%
Vanguard Equity Income: 10.05%
Mairs & Power Growth: 10.02%
Fideltiy Contrafund: 11.63%
Vanguard Wellington: 9.01%
Mairs & Power Balanced: 8.61%
Amana Income: 11.54%
Amana Growth: 12.27%
Vanguard S&P 500 Index: 9.38%
And here are few conservative allocation funds that are sub 8% but come pretty close:
Vanguard Wellesley Income: 7.30%
Berwyn Income: 7.21%
Quote:
Originally Posted by Hefe
Expected long term stock gains on US large stocks for the future is expected to be around 6% according to WSJ
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Just because they make a projection, doesn't mean they are correct. The truth is no one knows. The long term returns of the stock market since 1926 is 9% to 10%. And typically the WSJ is only looking out a decade. I would generally agree that 6% is all we're going to get for the next decade. I projected out 30 and 40 years in my post on this subject. Time periods that long usually come very close to the long term stock market average of 9% to 10%. I guarantee you the WSJ didn't project 30 or 40 years out.
Quote:
Originally Posted by Hefe
, inflation is clocked at 2.5% & fees would be in the neighborhood of .5% So you are at about a real gain of 3% before any taxes are figured into the mix. And don't forget that the market is volatile & it's possible that you may need the money during an extended down period such as we experienced around 2000 when so many of us thought we would retire early with all of our genius purchases of AOL stock, etc...
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You put the money in a retirement account. You have at least 3-6 months' worth of money put away in cash so that you don't need to dip into your stock investments. This is basic Dave Ramsey stuff. If you have money in taxable accounts, put it in index funds for tax efficiency. Mairs & Power Growth also has very low turnover and is very tax efficient. Oh, and the
returns published for mutual funds are always net of all fees.. Inflation is there no matter what you invest in. As I said, my assumptions were fairly conservative. I assumed no increases in salary or in the amount saved and no 401k matches.
Bottom line: It's a whole lot better to have $2.1 Million (or even $1M) even if it's in dollars with less purchasing power than to have NOTHING, which is what you'll have if you do nothing.
Quote:
Originally Posted by Hefe
What are the chances that a market that has seen upward growth for 8 1/2 years will revert to the mean pretty soon? Paying off a mortgage early can be a good thing because it is an immediate return, stocks are good long term but short term can be risky.
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So you put money in stocks for the long run and you get a 15 year mortgage like Ramsey recommends. I don't know if the market will go up or down. That's why I always recommend balanced funds like Vanguard Wellington. They soften the blow in a market downturn.
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