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Old 05-21-2010, 06:21 AM
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Originally Posted by bamaboy473 View Post
If you have that kind of average over 30 years, tell us all what your holdings consist of; I'll pay for that kind of information.

Looks like you're about to start the morning down about another 2%.
Originally Posted by Curmudgeon View Post
A little courage, gents, it's all on paper. I haven't lost a real dime in any 'correction' in the last 30 years and I didn't move a thing. Oh, and the average annual gain for those 30 years? 14.5% ...
Data is a funny thing. It can be skewed many ways. For example, there is Internal Rate of Return and Time-Weighted Rate of Return. There are also possible interim cash flows during the period that may or may not be taken into account.

I have access to a wealth of return information based on various asset classes. A well-diversified portfolio, 60% in equities and 40% in fixed income, has had an annualized return of 11.7% beginning January 1, 1980 through December 31, 2009. That is 30 years. The allocation of equities is roughly 70% US and 30% overseas, and diversified among large, small, value and blend. The fixed income is primarily short term, high quality. This is based on asset class returns, not including any fees or taxes. For a 100% Equity protfolio with the same characteristics, the annualized return was 13.7. The backup for these figures is quite voluminous but does exist. I have the data for these balanced portfolios going back to 1973.

30 years is a long time to maintain a fixed allocation such as this. For various reasons, most investors will not have returns like this. Some reasons are obvious, selling when it looks ugly and buying in good times. These figures a lump sum starting at the beginning of 1980 with no changes, other than rebalancing on a monthly basis. This is also critical because it keeps the portfolio in balance.

The past ten years has not been good for the headline indexes such as the Dow Industrials or the S&P500. Small caps and International including Emerging Markets have done better.