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" But remember that the market has averaged about an 11% gain per year versus 6% for bonds versus 3% for cash over the last 100 years--a pretty good track record. "

One thing to keep in mind here is that average return is not the same as compound annual return.

Here is an example: the market gains 20% one year and loses 10% the next. Your average return is 10%, yet you haven't made any money at all. You compound annual return is 0%.

As it happens the compound annual return for the 100 years up to December 31st, 2008 is 9.61%. This is not too bad, but most of us don't have 100 years, only in 20-35 years while we are investing. These numbers may be different depending on when you are retiring. Also, keep in mind that you invest in different times, so while some of your money are invested for 30 years before you retire, some are invested for only 10 years or less. So, if you look at this calculator: and look at compound annual return number for the past 30, 20, and 10 years leading up to December 31st, 2008, you'll see that the money you had invested for 30 years had annualized (real compound annual return) of 10.88%, for 20 years - 8.81% and for the last 10 years - .96%. The money invested after that would've lost value. Your real return on all of your money would depend on how much money you invested during each period.

BTW - I do believe in markets, but one shouldn't forget that there is always risk. Also, more often than not I've seen blogs that cited 11% "average" return and then went on to calculate how much money you'd have now if you invested $X 20 years ago and had this return compounded. These posts totally ignore the fact that getting 11% every year wouldn't produce the same return as if you get gains one year and losses the next.


We were selling our house last year and the market was just beginning to tank in our area. We took it off shortly and decided to rent but we did all that you suggested in hopes that it would lead to a buyer. Unfortunately, there's no insurance. You do all you can and hope for the best.

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