Quote:
Originally Posted by peter12
But 6.4% was the right answer, and 7% wasn't.
To be clear, I am not complaining. I invest a lot of my savings, and I do okay, but there is some absolute nonsensical bragging going on this thread with basically circumstantial and anecdotal evidence being offered.
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Why was 6.4% the right answer? Because one article presented that number?
Historically, equities have delivered about inflation + 5 to 6% (except during the high inflation years that destroyed returns).
Currently, dividend yields are about 2.5%.
Add historical expected growth to that and you get 2.5 + 1.5 +5 = 9%, which is about what the TSX has earned over its history.
One could argue that growth rates won't be as high as they have been in the past. It would be a bit of a dubious argument, profitability is actually quite high in recent years, but you could certainly make it.
However, to get to that 6.4%, you would have to assume growth rates of less than 2.5%.
And that would be unprecedented.
But sure, your answer was 'right'.