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COPYRIGHT 2005 The Dallas Morning News
Byline: Will Deener
Oct. 26--Listen to a stockbroker or financial planner hawk their services and you will almost certainly hear words to this effect: You can expect the stock market to return an average of 10 percent a year over the long term.
That statistic is trotted out with such certitude that most investors accept it as financial gospel. But can investors who start buying stocks today actually expect that kind of return over the next 10, 20 and 30 years?
"From 2005, guess the length of time that is needed to assure the long-term average," said Ed Easterling, president of Crestmont Research, a Dallas investment research firm. "The answer -- probably never."
Mr. Easterling is not alone in his effort to lower investor expectations. An increasing number of academics and financial experts believe market returns over the next few decades won't match previous decades.
A more realistic return -- or, as Mr. Easterling puts it, a return that a rational investor can expect -- is somewhere between 6 percent and 7 percent. The respected Leuthold Group, a Minneapolis research firm, also estimates long-term market returns in that range.
"It's unreasonable for investors to expect double-digit returns," said Eric Bjorgen, senior research analyst at Leuthold. "Too many investors tether their expectations to what happened in the last...
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