[TDL]

Please, please do not use 9% as your expected investment return. The numbers touted over the past decade & a half are mostly an artifact of the post WWII period.

Furthermore, consider the demographic issue of boomers retiring. These boomers are forced sellers, in other words returns will be muted for the foreseeable future because of the larger class of people who will sell equities in order to fund their retirements.

The equity risk premium is closer to 4% over cash, which in today's markets means your expected returns should be between 4.25% & 5%.

Regards, TDL

[Lightbody]

I disagree.

If you include tricks that most working class doesn't have the ability to pull off effectively, I believe that the returns will likely continue at that rate, and so does my financial advisor. Stuff like tax harvesting, margin borrowing, offsetting dividends with margin interest, carrying forward capital losses indefinitely, etc.

The simple fact that the majority of the population can't do these things means you get some premium over "regular" investments like mutual funds, CDs, and cash.

That said, it's perfectly fine for us to disagree on this, but no need to be rude (or down vote :P) since really none of us will know who wins this debate for 30 years :)

[TDL]

It looks as though you are taking a much more sophisticated approach to investments. In which case, you are current to have higher expectations. I was more reacting to the general belief among asset managers where they assume they can average 9% by doing little work.

We actually don't disagree, as it were. As long as you are systematic in your approach, continuously question your assumptions, & constantly look for "what ifs".

I agree with your last statement as well.

Regards, TDL

[0x12]

Zero effort investment return is typically a shade or two under inflation, so even if the absolute number increases your ability to buy stuff steadily decreases, as does your effective net worth.

[Lightbody]

Agree, but what is "zero effort"? My financial advisor is self-described "lazy" (he's an odd fellow, we're lucky to have him) but he does quite a bit more stuff than your regular Joe does when it comes to managing our money. That's why I believe that 9% or more is still reasonable to expect - even with inflation.

[0x12]

It could go down too, by 4%. Risk works both ways, hence the higher reward. You can't really expect anything, the only thing that you can do is trade risk for potential gain or loss and hope that you jump to the next ice-floe when you should.

Miss the beat and you'll lose rather than gain.

[Lightbody]

Sure, on any given year it can swing wildly, but long term I believe that those who invest in individual stocks ("the rich") will do significantly better than inflation.

It sounds like you're assuming it's a fair game and that everyone gets to participate. The reality is most people don't get to do the things the rich get to do, and their gain tends to come at the everyone else's loss.

For example, the rich often pay a lower tax rate than the middle class due to various tax policies designed to benefit them, such as offsetting margin interest against capital gains or carrying forward capital losses indefinitely. Those gains have to be included in your overall returns and are why the rich are getting further ahead.

That all said, the best way to boost your wealth is to create it from scratch and start a company.

[orangecat]

It sounds like you're assuming it's a fair game and that everyone gets to participate. The reality is most people don't get to do the things the rich get to do

Anybody can go to ETrade or Fidelity and buy an S&P index fund. (Or individual stocks, but that usually produces worse results).

carrying forward capital losses indefinitely

That may let "the rich" pay a low effective tax rate one year, but if so it means they paid a high effective rate in previous years where they had capital losses but couldn't use it to offset ordinary income. Getting rid of that offset would put an end to virtually all investing: investors would suffer 100% of their losses but keep only 85% or less of their gains, and that's not even accounting for inflation.