How much is a reasonable stock return rate?

How much is a reasonable stock return rate? This post is about the most important issue that all investors are concerned about.

Table of Contents

Why is there no answer?

Why do investors care but have never been answered?

Most investors have not thought deeply about this most basic question.
I don’t know how to answer, that is, I don’t have the ability to explore this question.
If you can’t give a reasonable answer, how can you analyze it? How to make a reasonable inference?
What number should be used to express the answer?

What is a reasonable answer?

I’m going to use several angles to get this number:

The experience and opinions of the world-recognized investment master
The fact that long-term real returns on stock markets around the world
Real ROI for Wall Street Professionals

Investment guru’s views

Charles Ellis (this person is a heavyweight in the ETF and financial investment industry, investors who want to invest in ETFs should read this book), the author of the book “Winning the Loser’s Game”, once pointed out with sincerity the reason why investors fail, mainly because they want to beat the market.

Charles Ellis once said a wise saying in the investment community, “The biggest mistake investors make is to try to beat the market. Retail investors can never beat the market.” The problem is that most investors don’t believe this. With decades of rich investment experience, he came to the conclusion that “most investors do not beat the market; the market beats them.”

But the fact is that most investors cannot beat the market. Just look at the performance of the most professional stock funds to understand everything. Please note that the fund managers in charge of stock funds are already the investors who know the most about stocks. As for how poor the return on investment of ordinary retail investors is, it can be You know it.

John Bogle has said that the reasonable annual return rate of stock prices in the long run should be about 7%, of which dividends account for about 2% and earnings growth accounts for about 5%.

The actual performance of U.S. stock market

Compare the long-term annualized return of the S&P 500 Index, including dividends, and the long-term annualized return of the S&P 500 Index excluding dividends with John. Berger’s view is consistent.

According to the table in my post of “Global stock markets performance comparision over the past 30 years in a table“, investors can easily find the reasonable long-term annualized returns for each country’s stock markets.

Using the free online investment tool I provide, “Querier to Annualized rate of return for S&P 500 Index“, you can easily find out: From 1970 to 2024, total 55 years, excluding dividend, the annualized rate of return (IRR) for Standard and Poor’s 500 Index was 7.85%; and was 10.95% if including dividend.

You can also use the free online investment tool “Querier to Annualized rate of return for Taiwan Stock Exchange” that I provide, and you can easily find out: From 1987 to 2024, total 38 years, excluding dividend, the annualized rate of return (IRR) for Taiwan Stock Exchange Index was 8.44%.

I believe the quoted in the previous paragraph. John Bogle’s figure of 7% is based on the long-term annualized return of the S&P 500 index, which represents the U.S. stock market, rather than a random guess.

Conclusion

Most investors still believe that the stock market is a place to get rich quickly, and do not want to believe the facts. They would rather believe in the media, believe in the so-called financial professionals, and leave their money to Wall Street.

If you can’t accept John. Berger’s advocated figure of 7% does not believe in history and facts, and advises you to stay away from the stock market.

Before investing in the stock market, please think of the quotes from Charles Ellis.

stock return rate — credit: smartasset.com

Disclaimer

The content of this site is the author’s personal opinions and is for reference only. I am not responsible for the correctness, opinions, and immediacy of the content and information of the article. Readers must make their own judgments.
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