What exactly is “growth”? It might seem clear-cut, but there are myriad different return objectives that can be considered growth. And there are myriad degrees of growth on the growth spectrum.
On one end of the spectrum is market-like growth. Historically, the long-term average for stocks has been about 10% annualized.1 And in my view, odds are stocks continue delivering about that over very long periods ahead—maybe a bit more, maybe a bit less. Again, remember: To get to that long-term equity average, whether stocks are 10% of your benchmark or 100%, the equity portion will experience near-term volatility—often huge. It’s the long term that historically has gotten stocks to higher average annualized returns over other similarly liquid asset classes.
Can you net more than that? Sure! If using stocks, you can take bets away from the benchmark and aim to beat the market. As discussed in Chapter 3, you needn’t always be right, just right more than wrong on average over a long period. This is very hard to do over long periods, and few professional money managers have done it—but it is possible.
Can you net materially more than that? Again, possible, but you’d need to take on materially more than market-like risk and be fairly consistently right, which is very hard to do. For example, a way to get mega-outsized returns would be to concentrate heavily—in just a few stocks or maybe a few narrow categories. If you’re right—and right repeatedly and for a long time—returns ...