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0 pointslegolas24126y ago0 comments

I might be misunderstanding you.

You said "Seven percent is generally accepted as the expected market return over a period of time sufficiently long enough to mitigate systemic risk, ". Also, When people say "historical return is 7%", they do not say it as a historical fact, but as a forward expectation like you did.

So, you need to provide why 7% is generally accepted, and why not 2%, or 70%.

Comparison to gdp and inflation definitely apply. Business profits in an index grow with Inflation and gdp growth, and stock value is the expectation of future profits discounted over time.

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tvaughan6y ago

Oh, and generally accepted as in one could cherry pick certain, short time periods and show that, say for three years in the early 80’s, the average return wasn’t seven percent. So, it’s generally accepted that “over some sufficiently long time period” one should reasonably expect to make seven percent when invested in a sufficiently diverse portfolio of stocks because that’s been the case historically

tvaughan6y ago

Why seven percent is considered a good rate of return, I don’t know. The answer is partially in the question itself, because that’s been the rate of return of the stock market. That though isn’t exactly satisfactory

tvaughan6y ago

Sorry I wasn’t clear. Generally accepted as in “a good return,” or “the best anyone should expect.” There’s no doubt that seven percent is the historical average.

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