White Paper – The Hard Lessons of Stock Market History
If you’re like most people, you believe there’s a great deal of truth in the old adage that
history tends to repeat itself more often than not. That’s an important adage to keep in mind
when it comes to saving and investing for retirement because it allows you to get a glimpse into
the future by knowing something about the past. The fact is, the stock market has been repeating
itself consistently enough throughout its history to allow us to see in it predictable and repeatable
long-term patterns, or market “biorhythms,” which are important to recognize and understand
when it comes to building a smart, defensive investment strategy.
First, you need to understand something about what particular “version of the truth” Wall
Street and most brokers like to tell when talking about the stock market. Most people have
probably been told that the market averages about a 9 percent return over the very long run. The
way that actually breaks down is that 2 to 3 percent of this return comes from stock dividends,
and 6 to 7 percent comes from capital appreciation—in other words, a 6 to 7 percent average
growth rate over the very long run.
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