Commenter Ed says and Timothy Lee seconds that

You wrote: “One cannot have a stock portfolio that perpetually returns 10% a year inside of an economy that only returns 3% per year.”

That was an incorrect assertion. It is incorrect in theory, and it is incorrect in practice, since it is emphatically not the case that “if there is only one investor who keeps re-investing his dividends.” I mean, the whole point of a 401(k) is that when you’re retired you’ll stop re-investing your dividends and consume them.

You are of course right that the value of stocks cannot grow faster than the economy in the long run. But the “return” on stocks also includes the value that is taken out of the market and consumed rather than reinvested.

This is correct. I should say one can have a stock portfolio that perpetually grows by 10% a year inside of an economy that only returns 3% per year.

You can have a stock portfolio that perpetually yields 10% a year inside of an economy that grows at any non-negative rate.

Though I think we agree that the ability to keep high yields going in the face of continual investment depends on disinvestment. The fact that you are investing in real assets doesn’t change the fact that there is an effective speed limit on the growth of the total market.

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