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Originally posted by Sidd Finch
Unfortunately, you can't assume steady growth in the stock market. We've all heard how stocks outperform -- but that is historically, over time, past performance that does not guarantee future results, yadda yadda yadda. If Year 40 in this scenario is comparable to, say, 2001... ouch. Or 1987 -- you don't have to use the "Depression/1929" scenario for it to be scary.
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No. You just have to assume that the next 40 years (or any given future 40 year period) will be totally unlike any prior 40 year period. Indeed, you need to assume that every year in the the next 40 years (really more like 60+ because you don't take it all out at once either) will be like 2001, 1987, or the other handful of rough years.
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Moreover, no one that I know of has done a study of stock market returns in years following big in-flows. I would think, though I don't know all the numbers, that any PRA program worth the effort would result in a pretty substantial inflow, one large enough to puff up share prices. And that creates a dangerous situation -- the investor who gets in during a run-up is always the most vulnerable.
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You are talking about getting in at $50 a month over 40 years. That is not "getting in during a run-up."
But you are right, we are talking about a structural change inthe markets with large new amounts of money to be invested, and it is hard to predict what the effect will be.
