https://www.youtube.com/watch?v=IoUVS9OLj-c

The real rate of return is objective, rational, and substantial. It delineates the exact performance of your capital from start point to end point.  It has actual value and meaning.  Like concrete beneath your feet, it’s solid ground. At its core, it is the truth. 

But finding the truth is often much harder than it appears. Searching for the real rate of return can be like battling optical illusions of smoke and mirrors. 

Fund managers, the media, and wall street proclaim average rates.  Every day, average yields are cited as some kind of absolute, predictive authority, assuming the clout that they have no right to take.

You need truth in your financial decision-making.  Instead of staking your financial future on the shifting sand of average returns, it’s time you recognize them for the imposter they are.

Table of contentsWhat We’ll CoverWhere Your Investing Mindset Fits into the Cash Flow SystemThe Stock Market Is Not What Most People Actually BelieveWhat Is the Difference Between Average and Real Rates of Return?What Is an Average Return?The Assumptions We Make Based on Average Rates of ReturnDiscovering the Fallacy in Average Rates of ReturnWhat Is the Real Rate of Return Formula?The Impact of LossesLosses are More Powerful Than GainsWith Losses, Average Returns Are Always Higher Than the Real ReturnsAverage vs. Real Returns in HistoryWhat Is a Nominal Rate of Return?Annual Real Rates of Return Over TimeInitial ConclusionsViewing the Annual Return with the Practical Lens of Taxes, Inflation Rate, Dividends, Management Fees and Transaction CostsComprehensive Conclusions Based on All the FactorsInterpreting the Historical DataThe Impact of Market TimingAdding Investment Over Time, Rather Than All at OnceThe Fallacy of Expecting the Future to Mimic the PastIn SummaryYour Decision Point

What We’ll Cover

In today’s conversation, we’ll take an in-depth look at actual market returns over the last 118 years and why average returns are misleading and can’t be taken at face value. 

And finally, we’ll reveal how to take control of your financial future and not just hope that your speculations and assumptions are accurate.

This conversation will answer:

What do market returns mean for me?

What returns should I expect?

How do I calculate the real rate of return?

What should I do to best take control of my financial future and build time and money freedom?

You’ll get the tangible facts and concrete evidence to form your own opinions. 

Where Your Investing Mindset Fits into the Cash Flow System

Understanding the real rate of return is part of ensuring your ability to reach your investing goals.  But before that, this knowledge will help you calibrate your mindset to fine-tune your goals in the first place, so you actually end up where you want to be. 

Both investing and mindset are a part of the Entrepreneur’s Cash Flow System. 

Today’s comprehensive conversation will help you invest well in stage 3.  But, to achieve investing success, we’ll help you approach it with the right awareness and mindset in stage 1, so your efforts don’t crumble.

The Stock Market Is Not What Most People Actually Believe

Many people believe that they can expect at least 5 – 7% gains each year in the market, that the market will always grow over the long haul, and that their money will compound over time.  At the same time, your experience of market losses, and the anxiety about your own portfolio suggest that our expectations are wrong. 

According to data from YAHOO! Finance, here’s the actual performance of the S&P 500 Index over various dates and timeframes: *

+19.4% gain 12/30/2016 to 12/29/2017 (12 months)

+9.4% gain from 12/29/2017 to 10/01/2018 (9 months)

-19.6% drop from 10/01/2018 to 12/24/2018 (about 3 months)

+5.04% annual real rate of return from 01/01/15 to 12/31/2018 (4 years)

+2.