CFP® Joe Anderson answers the following true/false question: “Since the stock market has earned almost 10% annually over the last 80 years, that’s a good number to use for investment returns.” Is 10% really a good rate of return for your portfolio? Find out in this episode short.
12:53 “It’s the sequence of returns. Even though the average may be 10%, some years you may get 12%, some years you might get minus 20%, depending on the markets. So no, do not use 10%”
13:06 “We feel a lot more comfortable using probably anywhere from a 5 ½ to 6 1/2 % rate of return, of course depending on your age”
13:16 “Don’t use those big numbers, even though they might look good on your spreadsheet”
13:24 “The markets are uncharted waters, we really don’t know what’s going to happen with the market on a day to day basis”
13:41 “Be careful when using these crazy big assumptions when it comes to market returns, because that’s recency bias”