{"id":1712,"date":"2016-05-17T06:47:44","date_gmt":"2016-05-17T13:47:44","guid":{"rendered":"http:\/\/springwaterwealth.com\/?p=1712"},"modified":"2020-03-12T00:10:27","modified_gmt":"2020-03-12T00:10:27","slug":"springwaters-source-low-interest-rates-and-expected-portfolio-returns","status":"publish","type":"post","link":"https:\/\/springwaterwealth.com\/springwaters-source-low-interest-rates-and-expected-portfolio-returns\/","title":{"rendered":"Springwater&#8217;s Source &#8211; Low Interest Rates and Expected Portfolio Returns"},"content":{"rendered":"<p>This is Springwater&#8217;s Source &#8211; a topic or issue in personal finance and investing, shared visually. The Source will share one concept, once a month, in about a minute or less.<\/p>\n<p><a href=\"http:\/\/springwaterwealth.com\/uncategorized\/springwaters-source-low-interest-rates-and-expected-portfolio-returns\/attachment\/risk-premium-image\/\" rel=\"attachment wp-att-1714\"><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter size-large wp-image-1714\" src=\"http:\/\/springwaterwealth.com\/wp-content\/uploads\/2016\/05\/Risk-Premium-Image-1024x628.png\" alt=\"Risk Premium Image\" width=\"1024\" height=\"628\" \/><\/a><\/p>\n<p>An important concept derived from financial economics is that of a &#8220;risk premium&#8221;.<\/p>\n<p>In a nutshell, this premium is what investors can expect to earn over and above the risk-free return (on safe investments like short-term government bonds) for investing in securities with uncertain returns.<\/p>\n<p>For US stocks, the equity risk premium was a bit less than 5% for the 50-year period from 1965-2015, as shown on the bar on the left. Stocks returned about 9.7%, while the risk-free rate was about 4.9%.<\/p>\n<p>The risk-free rate is likely be no more than 2% for some time &#8211; it is currently well below that level. If we add to that our &#8220;best guess&#8221; for the equity risk premium &#8211; 4.8% &#8211; we arrive at a projected return for US stocks of about 6.8%. This is shown on the bar on the right.<\/p>\n<p>The implications of US stocks potentially earning a third less than their long-term historical average are significant.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>This is Springwater&#8217;s Source &#8211; a topic or issue in personal finance and investing, shared visually. The Source will share one concept, once a month, in about a minute or less. An important concept derived from financial economics is that of a &#8220;risk premium&#8221;. In a nutshell, this premium is what investors can expect to [&hellip;]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_et_pb_use_builder":"","_et_pb_old_content":"","_et_gb_content_width":"","_mi_skip_tracking":false,"footnotes":""},"categories":[5,11],"tags":[21,48,50,66,87,107,117],"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/springwaterwealth.com\/wp-json\/wp\/v2\/posts\/1712"}],"collection":[{"href":"https:\/\/springwaterwealth.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/springwaterwealth.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/springwaterwealth.com\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/springwaterwealth.com\/wp-json\/wp\/v2\/comments?post=1712"}],"version-history":[{"count":0,"href":"https:\/\/springwaterwealth.com\/wp-json\/wp\/v2\/posts\/1712\/revisions"}],"wp:attachment":[{"href":"https:\/\/springwaterwealth.com\/wp-json\/wp\/v2\/media?parent=1712"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/springwaterwealth.com\/wp-json\/wp\/v2\/categories?post=1712"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/springwaterwealth.com\/wp-json\/wp\/v2\/tags?post=1712"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}