IFB80: Where Exactly Do Shareholder Returns Come From?

Announcer:                           00:00                     You’re tuned in to the Investing for Beginners podcast. Finally, step by step premium investment guidance for beginners led by Andrew Sather and Dave Ahern to decode industry jargon, silence crippling confusion, and help you overcome emotions by looking at the numbers. Your path to financial freedom starts now.

Dave:                  00:34                                    All right folks, Welcome to the Investing for  Beginners podcast. This is episode 80 tonight. We’re going to do something kind of different. A lot of fun. I think this is good. That’d be really interesting. So Andrew took a deep dive into where the 10 percent of returns of the s and p over the last 80 years comes from. And tonight we’re going to talk about the individual components that make up that 10 percent and kind of where it comes from.

Dave:                                  01:00                     I thought this was really kind of fascinating and Andrew, a lot of great work getting this together. So I’m going to go ahead and turn it over to him and we’re going to chat a little bit about it.

Andrew:                              01:10                     Yeah, thanks Dave. I guess that’s a good disclaimer, right? That A. I did a lot of work and be speculation on my part. Right. Fair enough. Idea and running with it. Yeah. Fair enough. So there’s no academic sources for this other than Google, so don’t come at me with their pitch forks, but I was always, you know, I’m curious.

Andrew:                              01:34                     It’s something you hear all the time, right? People talk about what’s the average return I can expect from the stock market and it’s been around 10 percent a year for over 80 years, like they’ve mentioned. And you know, you hear a 10 percent, you hear seven percent and seven percent is just the return with inflation taken out because inflation is also been pretty constant, pretty consistent around three percent a year. So it makes for a good kind of estimation, right? If you’re thinking about where are my finances going to go in the future, how am I going to plan and what’s like a reasonable, what are reasonable expectations? You know, I think to think that you could be an average person and become more rich than Jeff Bezos just because you’re going to be a stock market genius. I think that’s obviously absurd, but at the same time it’s not absurd to think that over a long enough time period with consistent deposits and even decent or just average returns from the stock market that you can make a quite a bit of a fortune where it can change your life over the very long term.

Andrew:                              02:47                     And so if we can kind of ...