Thanks to Bob Price for pointing me to this piece by Bill Gross, the world-famous bond manager. I once got to interview Bill at some length for a PBS TV series Jane Bryant Quinn and I did, and came away knowing this was someone worth listening to.
His message will not brighten your day. Yet there’s little question in my mind that Bill is basically right. From today’s prices, the next decade in the stock market is going to be uninspired — at best. And although Bill writes it better and with more authority (he manages billions of dollars with great success), he echoes some of the same themes you’ve been reading here from time to time. (E.g., the Internet is great for consumers, perhaps not great at all for investors.)
Anyway, I urge you to read his piece. The bottom line: Don’t spend like there’s no tomorrow. If you’re counting on the stock market to pull you through, you’ll run short of cash. Instead, save like there will be a tomorrow.
In place of using 10% annual returns as the assumption you make in your retirement planning model, let alone more, you might consider the possibility of after-tax, after-inflation returns of much less – perhaps 3% to 5%.
If this proves too gloomy . . . wonderful! You will be sitting pretty. If not, you won’t be as badly blind-sided.