Part 3/8:
Taking a closer look at the data, the real return on US stocks from 1950 to 2023 sits at approximately 7.63%. Even over the past 20 years, the real return drops slightly to 7.16%. These figures highlight that while 7% real returns are commendable, they still contrast sharply with the aspirational 10% figure often quoted.
A significant factor contributing to the inflated nominal returns over the past decades has been rising stock valuations. Since 1950, the dramatic increase in these valuations has skewed investors' expectations, leading to the assumption that such trends will persist indefinitely.