Originally Posted by email@example.com
Oh, and cboy, I have been thinking about your contention that most people could not achieve the return on investment that I have over the years in my 401K and I think you are correct. I have done it a super secret way; I go to whatever account management company that my company signs up with (have been w/ Putnam, Vanguard and most recently Fidelity) look down the list of mutual funds they offer, split my deposits between the two or three with the biggest numbers and forget it for 5 - 20 years 'til they move to another carrier and I am forced to choose 3 more. That is WAY too complicated for the average public school grad!!
Sarcasm aside (and I do appreciate your point), over the past 60 years the market has had a compounded annual return on investment of about 10.5% per year. So if you are getting a 12% return on your personally managed 401K over those years you are beating the market and you deserve a lot of credit. The fact is most people don't come anywhere near matching the market's return. In fact (well, if you believe the sources quoted by the Motley Fool it's a fact) 3 our of every 4 professional money manager looses money to the market average year in and year out. And they are the PROFESSIONALS. So it is little wonder that the average Joe falls far short of that 10% return. Also note that I never said a 12% average annual return could never be achieved. Mathematically it is certainly possible. What I'm saying is that in reality, on average, the American investor has been achieving far under that rate of return. As a result, I think your financial projections would be more realistic if it reflected the earning an average Joe achieves rather than the earnings he might possibly achieve. Most of the projections I've seen use a more conservative 6-8% rate of return for medium risk investment and 3-4% for low risk.