Ok, this has a potential to be in GD., but for now there is still a factual or mostly factual answer.
Let’s assume that the S&P 500 starts 2009 at approximately where it is right now.
Let’s also assume that for the last 10 years I have been putting away $2000 in a fund that tracks with the S&P 500. Deposits made at the first business day of every year.
What kind of annual interest rate would I need to get in order to have a 7% average annual return on all deposits 10 years from now? That is, I’ve been making deposits, I keep making deposits, and want to retire in 10 years.
I ask because it seems oft quoted that in the “long-term”, the market averages a 7% return. Reports earlier in the week said that the DJIA was below where it started when Bush took office, so I am guessing that means the market average annual return for that time frame would be approaching 0%. I picked a 20 year time frame because while that may not technically be “long term”, it seems to me that many people do not start seriously investing in anything until they are in their 40’s.
Lastly, is it reasonable to expect a 7% average annual return from the years of 2000 to 2020? If you have the figures, how about a 7% from 1990 to 2020?