Do Stocks Return 10% on Average? 

Ben Felix doesn't need investments to promise high returns, he just stares them down until they give him the return he wants

No, Dave Ramsey says to use 12% instead!! 😂😂

I just copy and paste what Ben Felix says to my friends and they think I'm a genius.

Ben Felix, my best personal advisor, for free. You re doing a great job!

Ben Felix returns over 10% on average, so the market must catch up

Thanks for being a "no flash" informative toutuber. Sight for sore eyes

Always excited to see when you upload!

Ahhh the daily reminder that I will retire 5-10 years later than I hoped

Always stoked to see a Ben Felix vid ❤

As always , Ben delivering high quality material for free. And thanks for explaining very well the rear view mirror bias about rising valuation and expected return

Ben! I love your content and your outlook. It helps me sift through financial news and buzz and feel overall more informed. Your rent vs. buy videos were instrumental in my family making our decision. I think you do a great job balancing research and more advanced concepts, but still breaking it down for the average person. All that said, a bit of feedback! Your content is fairly dense (that's why we like it), but for that reason it really would benefit from more visualization. It can be hard for the average person to digest a lot of figure-heavy content without a visual aid. Cheers

So, if I understood correctly, stocks in general should be expected to provide average annual real returns of ~5%, even though US stocks have been outliers for the past ~70 years, providing average annual real returns of ~7%.

Thank you once again for the great work brother!

Mr. Felix: from Brazil, congratulations for a job well done for the years I am following your channel! Thank you very much, indeed!

Solid content!. Thanks Ben!

Thank you Ben!

As a US investor I'd happily take a real 5.57% return on my stock allocation as evidenced from the 1900 - 1950 period of performance. I'd take that all day every day with a smile on my face.

Come on Ben, let a man dream 🥲

Thanks, this is a great resource to point people who spread bad info about expected returns to

I like these videos. They are like a short summary of the corresponding rational reminder podcast episode.

I'm learning a lot from your videos. Hugs from Brazil

If Dave Ramsey watched this I'm pretty sure his head would explode, if he could listen.

Thanks, Ben, for another video

Thank you Sensei 🙏

Excellent vídeo! Underrated channel! I am from Brazil, but have global assets. Focus on buying VT (80%) and irish EMVL (20%) ETF, cause it is so cheap. I use ACWI as benchmark. Best channel on finances.

great video, learned a lot, thanks!

Geez if there were ever an episode that deserves to be the face of Rational Reminder

A nice precis of your recent Rational Reminder show.

Ben, another virtuosic video, and offering perspective on my own pattern of being "overweight" US in the portfolios I manage for family and friends. Thanks for putting eloquence, analysis and data to work for those who follow your work avidly. I'd love to see you speak to the question of bonds, be they government or corporate, and whether they are "broken." That is, do they negatively correlate with stocks anymore, reduce the volatility in portfolios, and the other usual claims about bonds, or are they no longer and less likely to perform as they have historically? I know it's usually a bad idea to claim anything is "different" now where market behaviour is concerned, since anomalies usually wash out as long-term patterns reassert themselves. That said, please consider addressing the state of bonds and fixed income in general as a feature of portfolio design.

That's why my portfolio tracks an All World Index. I use VT as a basis. Keep fees low but buy the biggest haystack you can. Not the QQQs, not the sp500, not the US TSM, THE ENTIRE WOOOORLD😂🎉

Dear Ben Felix, you are the best!!!

I see Ben. I like and comment before even playing the video.

I run my own expected return estimates, I first run a regression on historical CAPE and it's forward 10 year real return then add up inflation to find Nominal expected return, then I average estimates by vanguard and state street with my own estimate to get a more realistic sense of how much return is to be expected (in case I'm biased). I then add up factor premium based on historical portfolio loadings and a discount of the premium by 40% to account for post-publication factor decay. I then account for fees and taxes in order to get a net expected return estimate. Using this to help plan my retirement portfolio and my dad's.

Hey Ben. Could you please do a video of the advantages and disadvantages of paying up a mortgage. And when would it be a good idea to actually have a mortgage depending on a level of income. I think there are a lot of confusing videos online about paying up mortgages, or closing them entirely. I have watched on the rational reminder podcast a similar video, but it would be interesting to see one it on your channel too. Thanks Ben for insightful videos, been watching then for YEARS. 😊

@BenFelixCSI please do a video on “Does size matter (in value investing)?” Avantis has too many options with AVLV, AVMV, AVUV (first world problems). Thank you!

Super insightful 👌 I am investing in ETFs giving me a globally diversified portfolio, while managing my expectations for the returns. Thanks for sharing. 🙏

I feel rationally reminded

Ben, thanks for more great info. Will there be a 2024 update of the 'Expected Returns - 2023 Update' on the PWL website?

Fantastic video

Very interesting 👌

Comparing the USA from 1900-1950 to 2024 is insane. How can you say with a straight face that the USA is even remotely similar from over 120 years ago. USA has had big returns because it is a powerhouse of innovation and execution and friendly government regulation and monetary policy

What is the more reasonable expected return for small cap value stocks? (i.e AVUV, AVDV)?

Hey Ben, thank you for all these videos! I've been binge-watching since I discovered your channel a couple of weeks ago, and am learning a lot! I saw the interview where you built a value-tilted portfolio on TD's channel, and I wanted to ask, would it be reasonable for a Canadian investor to invest in some split between VVL and XEQT as a simpler approach? I remember hearing you say you tilt away from the large growth stocks, but still want to own them. VVL isn't as tilted as, say AVUV or AVDV in the US, but perhaps one could compensate by having a higher allocation into VVL?

Hi Ben, Would love your perspective on the change in the Japanese CB policy and its potential impacts ex. on international cross currency carry trades.

Great video as always ! Can you please make a comparison with real estate expected returns. It seems almost all the workd real estate markets are running high everywhere. It seems the baby boomers experience a real estate buy low in their youth and sell high at old age despite really bad demographics ... in the west at least. I would really like to hear your opinion on this

Favorite financial scientist and I always look forward to your content bud. So when can we expect a PWL global equity or global factor ETF managed by Ben Felix and available to the US? I don't think AUM would be a problem for you guys if you did. I would scoop up some shares to support if available on the US market.

Thank you

Thanks for the great content Ben 👍🏾. When you say “nominal expected 7.42% assuming 2.5% expected inflation” if inflation stays higher for a longer period could that result in a higher nominal return and vice versa?

It's a tale as old as time, unfortunately all this great info requires attention, skepticism, willingness to accept "but"s, whereas on the other hand it's so much simpler for anyone to just go out there and say" invest in the stock market and make 12% a year". Keep up the good work Ben, hopefully this great content will reach more and more people!

Hey Ben can you do a video about if the average person needs a Financial Planner? What are the advantages (if any) what are the disadvantages. Do those with CFP designation add any value or should we only use advisors with CFA designation only.

Thank you for posting this video. A lot of people who keep referring to S&P 500 returns of "12% on average" as an argument to throw every dollar you save in the SPY need to watch this video. As mega caps continue dominating, it will be harder and harder for them to continue valuation trends and expecting those types of returns on a real basis is just totally unrealistic and borderline insane.

Hi from France Ben and thanks for your video , top as usual. You talk about total return expectation on the US market which is lower due to the current market valuation compared to history. But as far as I know this is specific to US large value ? If we talk about Us small caps, or even better US value small caps it is not the case, right ? Even if we talk about US Value big caps I think it is also different ? Could you please confirm this point ? Thanks !

Hey can you do a video on the alternative inflation measures and give proper analysis of those including pros and cons and how that affects the average person in the real world (i.e. how we actually experience things). The US BLS uses things such as 'hedonic price adjustments' and such which I think drastically and unfairly reduces the official CPI measure.

Does PWL publish the methodology of how they estimate expected returns? I wish to use the same for my country (which is not the US or Canada)

Great walkthru. I run several calculations for my retirement. Even just including sequence of return nulifies the optimistisk predictions many people have. I am also careful to always use geometric averages. Could have been clearer on dividends - think you said they were included in your numbers. But I did not hear anything about wether reinvestings those dividends was taken into account?

Find this channel very informative, thank you so much for spending the time and energy ! Would be interested in learning more about the following: Future valuation is a major driver of future returns, are valuation multiples like p/e, ev/ebitda,… mean reverting and/or is there a structural upward drift of equity valuations due to - for example - lower transaction costs which implies lower cost of diversification making equities more attractive than bonds today vs. the past ? Many return prediction models I see often imply steady valuations or a return to a long term mean, but is that a sensible assumption to make ? Happy to discuss ….

Ben Felix is protecting me from doing stupid things and chasing unrealistic returns. Thank you for your priceless contribution to the community 🙏🏼

Hi, you mentioned the "block bootstrap" method for simulating stock returns. Where can I find an article describing the method for financial applications? Thanks!

Hi Ben, is an equal weighted S&P 500 a better approach with the current high valuations of the market cap index?

Fair to plan conservatively and be pleasantly surprised at unexpected extra returns?

Thanks Ben, your videos are informative and amazing 🙏 Im curious, doesn't that mean investing in real estate is better than stock market especially Vancouver and Toronto real estate for us, Canadian?

YES, a perfect video for this Friday. You and your podcast has taught me a lot ❤

What do you factor in to calculate the 4.62% real vs 7.24% nominal expected return? Is it just inflation, or any other things like managing fees, taxes, etc?

What about any premium for the USD being the world reserve currency? If I recall, it was in 1944 at Breton Woods that it was agreed that the USD should be the referenced currency. Seems like a mighty big coincidence that US stocks post 1950 did markedly better than they did pre 1950. How much that is worth I have no clue but it must be worth something no?

I continue to have a globally diversified portfolio, with a heavy tilt toward small cap value.

For last 15 years our average returns are 14% across our portfolio (including dividends) - and the last 12 months on 26% real return.. So having just retired will be enjoying!

Greetings from UK. Valuations certainly matter. The UK market has been decimated by this being stuffed with old world companies even if they have lots of nonUk exposure. Interesting that MCSI USA Small cap value index contains 25% financial companies. MSCI All Country World Index is 25% technology companies. Think about your personal situation carefully before choosing your ETF mix

Hey Ben, What do you think about Canadian stock potential going forward? With the massive labour market productivity differential between Canada and US, could it be argued that further returns in the US could be diminishing returns, as easy efficiencies are harder to come by; while chronic underinvestment in Canadian businesses have created opportunities for capital investment to achieve greater real productivity among Canadian companies?

Thank you! I just saw this stat cited by a up and coming RU-vidr who did a video on retirement planning. 25 years of near zero interest rates and repeated huge rounds of Fed quantitative easing and govt stimulus. Not sustainable.

Does PWL have any kind of "sequence of returns" indicator showing relative SoR drawdown probability or risk based on stock market valuation?

This is frightening TBH. As a person investing something along the lines of 1/3rd of my income after employer paid benefits, this puts my usual projections from way over what I might need, to basically just meeting what I will need. And I know I’m in a better position than most others. It seems like our expectations of retirement are doomed to be thwarted. It would be interesting to hear your thoughts on the potential of retirement crises due to the shortfall of retirement savings spurred in part by absurd growth expectations. Or maybe that’s more in in How Money Works’ wheelhouse. 😢

Please evaluate Australian real estate vs stocks.

I see a Ben Felix New Video, I click

I think the US dollar standard gives the US a huge advantage. They are also built in away that strongly encourages entrepreneurship and innovation which leads to them being outliers globally. They also have a global Hegemony which allows them constant access to resources at good prices. That said this could all be waning.

A further item to consider in returns is the effect of taxes, which will also reduce the net return. However this is difficult to factor in due investor profile differences

Ben could you please share your thoughts alternative ETFs like managed futures and hedge fund ETFs?

I would love to see if and how much of a correlation there is between the more recent rise in valuations and the move of money into 401k plans. Does all that cash flowing into funds force a rise in valuations simply due to the volume of money needing a place to go? Or am I thinking about it wrong

There is a hypothesis that i am testing. To which extent is stock return for the main indices explained by capital inflows from pensions and to which from foreigner inflows. With rapidly changing demographics, where younger generations have to expend more on their housing and generally save and earn less compared to the cost of living to older gens, should we expect lower inflows of money in the public equity markets, and how this change will impact the return long term. Also in a fragmented world, to which extend do we expect foreigner inflows to slow down, and how this could hinder the long term growth.

Ya gotta admit he has nice hair. Do appreciate clear concise insights of the financial markets.

can you confirm that globally, at the end of the day, stocks(globally diversified) are the best cagr giving asset class, considering all others(obviously those too taking global diversification into account), if not, a video about it would be great!

Did you explain why the Sharpe ratio punishes downside volatility as well as "upside volatility".

Hey Ben, another great video. What do you think of the idea that the risk premium is declining because we have now had a global financial crisis and a pandemic that both resulted in governments dumping tonnes of money into the financial system? I'm an investor and that definitely makes me feel that markets are less risky than they once were (hence I'm happy with a lower risk premium, because there's also just less risk)

Even if longer time series in one way makes a more accurate estimation. Dont you think that there is too much different of both stock market (bias of certain companies) as well as global market. The last 20 years are more important than first 20 imo. Perhaps a differentiated weight of the total time series could be done to address this?

I love ecomony - what ever outcome you want you can cherrypick your arguments into it the outcome.

Hi Ben, at the end of the video you state that the total market index fund expected nominal return is 7.08%. When you said total market index fund did you mean US stocks should return 7.08% or Global stocks (US and International) will return 7.08%? Thank you

Always when I want to enter the stock market the valuations are too high...! 😞

Nominal returns make it easy to compare relative to other rates, such as interest, does it not? While it's interesting to look at inflation-adjusted real returns, it only adds to the math you have to do without any other benefit. 10% nominal stock return compares easily to e.g. 3.3% savings accounts. Adjusting both figures for inflation doesn't provide much in terms of information, but just adds and extra level of anxiety (when you see the negative real return of savings accounts)

what is the expected return for your model portfolio currently ?

Would you ever do a video comparing real estate returns against stock market returns (with equal amounts of leverage)?

are we talking sp500 with or without dividends?

basically a handful of stocks is holding up the entire market. Similar to 2008, when they slip free up some cash. As far as why US market is better 401ks, smart people will always take the match and props up the market since the inception.

is the real return arithmetic or geonetric when you referred to US returns ?

I use a 5.5% real expected return in my planning calculations with a 50/50 US/Intl portfolio with 10% treasuries. Might still be a little rosy, but I also have a pension to fall back on.

A question I've had for a long time is whether US stocks are themselves being pushed up because an endless influx of money via worldwide pension schemes. My British workplace pension is 70% US equities. There is nowhere else to put money in (from a layman's perspective) with remotely good returns to actually aim for a sustainable retirement. At breakeven investments, gilts or t bills, the average person will run out of money 10 years into retirement (napkin math). There is a whole generation whose retirement depends stocks returning 10%. Whoever figures out how this story ends will go down in history books.

Is holding 100% VT over my investing lifetime a good choice? I just want a simple option that I can stick to for decades.

Sorry but in 1900 there was no such thing as quantitive easing and other monetary policy that boosts the stock market. No way am I using data from 1900 to predict what will happen for the next 30 years

Should have broken it down to returns from 1950 to the early 1980s and returns from early 80s to today. To get an idea of the extent to which the lower lower lower interest rates of the last 40 years may have played a primary role

haven't watched the video yet, but if you mean I put in 100% that looses 90% of it's value, then yes stocks always return 10% in my experience, never fails!

The U.S. market is a gigantic bubble, one which started inflating in earnest in 1982. The only thing keeping it on its current trend is the common expectation that it will do so. Unfortunately, it's more or less impossible to say when the market will snap back to reality.

What is your reading list?