OK, But Where You Gonna Get 9%?
My simplification of investing principles and practices is one of the most heavily criticized topics I write and podcast about. Here, I'll give you the quick elevator speech: Patiently invest in a cheap, broad, total U.S. stock market index fund. Invest early, contribute regularly, never sell, do nothing, remain patient, don't meddle, and let the market take care of the rest. See, simple! I've also written many times about how the 155-year history of the U.S. stock market has delivered a return of over 9% annually (and 10% annually over the last 100 years). Almost every time I discuss this topic, someone snidely asks, "OK, but where you gonna get 9%?"
That would be a fair question, except for the fact that we discuss it regularly! "A cheap, broad, total U.S. stock market index fund." Examples could include VTI, VTSAX, or FSKAX. This isn't a theory. It's not some hypothetical. It's not a case study that looks good on paper but is difficult to put into practice.
Today, I'll open the books of my life. For the past 15 years, my investment accounts have held one thing and one thing only: "A cheap, broad, total U.S. stock market index fund." I've made zero changes. I spend literally no time managing it. I give zero consideration to the ups and downs of the market. I never consider tweaking or meddling. What do I have to show for it? I'll show you.
My investment account updates the annualized return numbers at the end of each month. Given that April just concluded, I jumped into my account to see where they stand, and here's what I found:
Over the past 10 years: 15.0% per year
Over the past 5 years: 11.9% per year
Over the past 3 years: 21.4% per year
Over the past 1 year: 31.7% on the year
I'm not trying to beat the drum of "building wealth" or getting rich, but rather, I want people to understand 1) how real this is, and 2) how simple these principles really are. If we're going to invest, we might as well be good stewards of the resources we're blessed with.
Where you gonna get 9%? Right here. Right in front of us. While we don't know what the future will hold, the last 155 years tell us that, yes, it will be messy, but also yes, it will be rewarding. Stay patient. Stay simple.
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