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Long-term uncertainties

If you are a long-term investor investing for retirement or to leave money to your children, there’s one thing you must know: what will be the long-term returns on equities? Which raises a problem: we cannot know this. There are at least four different approaches to the problem, which yield different answers.

One approach is to simply assume that future returns will resemble past ones. Since 1900 UK equities have delivered a total return after inflation of 5.5 per cent a year. Why not assume the future will see something similar?

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