Hi everyone, I wanted to get your thoughts on Bogle’s prediction of 4% annual returns expected for the upcoming decade. This except was taken from his book: The Little Book of Common Sense Investing (pg 98-99):
... (pg 98) Let’s consider the sources of return as they appear today. First today’s dividend yield on stocks is not 4.4% (the historical rate), but 2.4% per year in the contribution of dividend income to investment return. As for corporate earnings, let’s assume that they will continue to grow (as, over time, they usually have) at about the pace of our economy’s expected nominal growth rate of 4-5% GDP over the coming decade, below our nations long-term nominal growth rate of 6% plus. If that expectation proves reasonably accurate, then most likely expectation for the investment return on stocks would be in the range of 6-7%. I’ll be cautious and project an annual investment return averaging 6%. ... (cont. pg 99) My guess - an informed guess, but still a guess - is that, by decade’s end, the P/E ratio might ease down to, say, 20 times or less. Such a revaluation would reduce the market’s return by about 2% per year, resulting in an annual rate of return of 4% for the U.S. Stock Market.
(Apologies for any typing errors!)
Thoughts?
Submitted September 04, 2019 at 06:14PM by mOeKMu https://ift.tt/2PM5Fgh
