From Nallu: “I am trying to establish or start a college fund for my 5-year-old daughter. I would like to know if there are any funds or stocks which I can count on 15% to 20% annual return. Thanks in advance. Nallu Reddy.”
There are lots of stocks and funds that have produced that kind of return in the past, but that’s no guarantee they can keep it up. Indeed, to a certain extent it may even suggest lower-than-average returns in the decade to come, as the overall market reverts back to its very-long-term trend (if it does).
That’s not to say a few funds and many stocks won’t grow at 15% or 20% a year by the time baby Helen (I’m just guessing) enters Vassar. They probably will. But only with hindsight can we know which they’ll be.
So your use of the phrase “count on” is kind of the deal breaker.
Typically, you’d be wiser to expect — and even then not count on — more like 9% or 10% pre-tax from dividends and appreciation.
Silver lining: you’re a step ahead just to be thinking about this and to be starting now to save for your daughter’s education. And if you DO earn the kind of return you seek, as you certainly might, then you’ll just have that much more for some other worthwhile purpose — like a baby brother.
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