Originally Posted by Dakota
I'd be curious as to what all those <relatively safe> investments are. As of last week the 10yr average on the S&P500 was something like 1.6%/yr (before dividends, but the dividends don't make too much difference).
March 16 2008: 1288
March 16 1998: 1099
I'm not trying to give you specifically a hard time, it's just that (other) people talk about how averaging 7% a year is no big deal, when clearly that isn't the case. I guess if your interest rates are low enough you could get T-bills, but that seems like a relatively big hassle for little return.
You must have excellent bedside manner Dakota, thanks for asking in such a polite way.
If my attachment attempt works, the performance of the S&P 500 index from 1950-present should be up. If you look from 1995-2002, overall there was steady growth over the period but a strong rise and fall in between (largely courtesy of the dot com bubble). This explains why your 1998-2008 figures show low returns: the index was overvalued in 1998. But if you invest over a long period of time, you can see the trend is a relatively steady return.
I appreciate that my analysis offers little consolation to someone who's experienced 1.6% returns over the past decade. A low risk and short term alternative would be a prime money market fund, they return around 4% right now due to the low prime rate. Marginally higher return than my loan interest rate, but when you're fresh out of med school I say take what you can get.
My personal strategy is more aggressive and involves a mix of mutual funds and individual stocks, but I enjoy finance (and higher than 4% returns!). For those who don't, and those who feel an inherent value in being free of debt, it's probably not worth the effort. Still, I'd say an S&P 500 index fund remains an excellent choice for investing for the long run.