Saturday, June 18, 2016

4% Is a Pretty Good Return on Investment

Most folks lament the low return on investments these days.  1% on savings accounts, 2-3% dividend yield, 1-2.5% return on GICs/CDs.  A well diversified portfolio might return 4 or 5% these days.  Sounds terrible, right?

Not really.  We all think that inflation is around 3%, so we look at a 4% return as paltry.  Only 1% over inflation is not good we say.

Actually, the last time inflation was around 3% in the USA was 2008 (see below).  Right now, we are experiencing about 1% inflation.

So a 4% return today is more like a 6% return in the days of 3% inflation.  Feel any better?

Current Inflation Rate Table
InflationData.comCurrent Annual Inflation Rate
YEARJANFEBMARAPRMAYJUNJULAUGSEPOCTNOVDECAVE
20161.37%1.02%0.85%1.13%1.02%NANANANANANANANA
2015-0.09%-0.03%-0.07%-0.20%-0.04%0.12%0.17%0.20%-0.04%0.17%0.50%0.73%0.12%
20141.58%1.13%1.51%1.95%2.13%2.07%1.99%1.70%1.66%1.66%1.32%0.76%1.62%
20131.59%1.98%1.47%1.06%1.36%1.75%1.96%1.52%1.18%0.96%1.24%1.50%1.47%
20122.93%2.87%2.65%2.30%1.70%1.66%1.41%1.69%1.99%2.16%1.76%1.74%2.07%
20111.63%2.11%2.68%3.16%3.57%3.56%3.63%3.77%3.87%3.53%3.39%2.96%3.16%
20102.63%2.14%2.31%2.24%2.02%1.05%1.24%1.15%1.14%1.17%1.14%1.50%1.64%
20090.03%0.24%-0.38%-0.74%-1.28%-1.43%-2.10%-1.48%-1.29%-0.18%1.84%2.72%-0.34%
20084.28%4.03%3.98%3.94%4.18%5.02%5.60%5.37%4.94%3.66%1.07%0.09%3.85%
20072.08%2.42%2.78%2.57%2.69%2.69%2.36%1.97%2.76%3.54%4.31%4.08%2.85%
20063.99%3.60%3.36%3.55%4.17%4.32%4.15%3.82%2.06%1.31%1.97%2.54%3.24%
20052.97%3.01%3.15%3.51%2.80%2.53%3.17%3.64%4.69%4.35%3.46%3.42%3.39%
20041.93%1.69%1.74%2.29%3.05%3.27%2.99%2.65%2.54%3.19%3.52%3.26%2.68%
20032.60%2.98%3.02%2.22%2.06%2.11%2.11%2.16%2.32%2.04%1.77%1.88%2.27%
20021.14%1.14%1.48%1.64%1.18%1.07%1.46%1.80%1.51%2.03%2.20%2.38%1.59%
20013.73%3.53%2.92%3.27%3.62%3.25%2.72%2.72%2.65%2.13%1.90%1.55%2.83%
20002.74%3.22%3.76%3.07%3.19%3.73%3.66%3.41%3.45%3.45%3.45%3.39%3.38%
Note: Red indicates Deflation, NA indicates data not yet released.
Get all Historical Inflation Rates since 1913 from InflationData.com          Web Masters: Get This Widget

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