A common question I get in my "alternative" financial life style is
"How can I get a higher rate of return on my investments?"
People are sick of the barely existent interest rates on their checking or savings accounts. People don't like the rates on T-Bills or government bonds. And people are also tired of the whopping 3-5% on high quality corporate bonds.
Isn't there ANYWHERE I can get a better return? Why, I need my 401k to magically constantly forever unabattedly perpetually infinitely grow at 10% in order to retire at 62!
The charlatans come in and say "stocks."
But let me beat this dead horse one more time in case you didn't get it the first 40 times.
What is the REAL rate of return of stocks? And when I say REAL I mean what kind of income do stocks generate? I know everybody has formed a circle jerk around capital gains and believe that magically constantly forever unabattedly perpetually infinitely increasing stock prices will solve everybody's problem, but what drives those capital gains? What gives stocks their value?
The answer is -dividends.
It's not "earnings" because ultimately a life long share holder never SEES all the earnings. They are ONLY paid dividends (and a final cash out should the company be acquired or their shares be purchased), but even that final cash out is dependent upon the future dividends those acquired assets will generate.
So what "rate of return" are stocks truly providing? What is the real "interest rate" you are earning on stocks?
Well my fine 401k Zombie Lemmings, here it is:
I strongly recommend you plan on working till you're 75.