What might the last 20 years say about possible asset returns for the next 20 years. Here are returns for various assets from two different time periods. The table is divided into two sections. One section is assets that have performed near or above their historical returns over the last 20 years and the other sections has the assets that have underperformed their historical long term averages. The expectation is that over the next 20 years the assets that have underperformed
What does the ProFolio Return Probability Calculator tell us about possible returns for the S&P 500? Since future inflation may or may not match past inflation, we will use the real rate of annual return for the S&P 500, with inflation subtracted out, along with annualized volatility from 12/31/71 through 2/28/17. The calculator tells us that we should expect an annual return greater than 20% above the inflation rate around 19% of the time or around once every 5.4 years.
According to Hendrik Bessembinder, a finance professor at Arizona State University, in his paper, "Do Stocks Outperform Treasury Bills?", over the period from 1926 to 2016, a randomly selecting individual stock outperformed the value-weighted market, essentially a market index, four percent of the time. In fact, more than half of common stocks deliver negative lifetime returns. Finding a great stocks is like finding a needle in a haystack. The odds are stacked against you.
Suppose you live in a 100 year flood plain. Your chances of experiencing a flood are 1% every year. If you live in the house for 30 years, your chances of experiencing a flood are about 26% (1-(0.99^30)). It would definitely be prudent to take safeguards against possible flooding if you plan on living in a home for a long period of time in a 100 year flood plain. Suppose you buy a house in a 100 year flood plain that had experienced a recent flood. Has the probability of