Stocks on average provide a long-term return of 6.5 percent real. When stocks are insanely popular, they provide on average a negative long-term return. When stocks are hated, they provide an average long-term return of 15 percent real.

Stocks don’t actually provide a long-term return of 6.5 percent to any but a small number of investors. Why? Because most buy most of their stocks when the long-term return is negative and then are unwilling to buy stocks at all when the long-term return is 15 percent. Passive Investors are forced to sell when those negative returns come in because they were expecting to see long-term returns of 6.5 percent and that is just not in the cards for Passives.

All of this can be verified by looking at the historical record. The same realities evidence themselves over and over again. But the most common response you hear in reaction to these realities is “Stocks have been doing great!” Stocks have always been doing great for a long time when they are exceedingly dangerous for the long-term investor. It’s their popularity that makes them so dangerous.

This is a case where people will actually deny that the numbers are what the numbers are because the numbers conflict with what recent experience tells them “must” be so. The studies we all use to plan our retirements all get the numbers wildly wrong. Why? They are structured to confirm for us what “must” be so but never in fact has been so in the real world.

You’re writing about something important, in my assessment.

Rob