What Return Can You Expect From the Stock Market?

The last ten years have been absolutely awful for the stock market. It has been the worst decade in the past 70 years. The Dow Jones index dropped 10% and the Nasdaq dropped around 40% thanks to the tech bubble popping. This may not seem like much but inflation has reduced the value of a dollar tremendously the past 10 years and the stock market has not helped out either.

Other investments such as bonds and real estate have not done well either this past decade. Is is time to pack up and stop investing your money? Absolutely not!

The average rate of return that you can expect long term from the stock market [long term meaning 30+ years] is 10%. 10% in one year is not much and in two or three years 10% a year will not do anything amazing as far as growing money is concerned. However after 10, 20, and even 50 years 10% a year compounded will do unbelievable things to money, even in small amounts.

It is a shame that this past decade has not treated investors well but there is a lot of reason for optimism. Shares of companies are much cheaper now then they were this time 10 years ago when we were all worrying about Y2K.

I have no idea what will happen in the short term but I know that the second decade of this century will go much better then the first decade did for investors of all kinds.

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