The S&P 500’s earnings per share grew an inflation-adjusted 2.4% a year in the 1970s, fell 0.7% a year in the 1980s, grew 4.7% in the 1990s, slid 1.9% in the 2000s and soared 8.7% in the 2010s. Even over decade-long stretches, earnings growth has been all over the map. I’m inclined to assume future earnings growth will be similar, but there are no guarantees. Assuming 2021’s corporate profits come in as expected, the S&P 500 companies will have notched average annual growth in earnings per share of 7.3% over the past five decades, or 3.3% a year after adjusting for inflation.

To the dividend yield, Bogle would add expected earnings growth. Over the past 50 years, the S&P 500’s yield has averaged 2.8%.Įarnings. For buyers of the S&P 500 today, the starting dividend yield is some 1.3%, which is very low by historical standards. This is the one component of future returns that’s known for sure. Here’s what the Bogle method tells us about today’s expected stock returns:ĭividends. He subsequently revisited the idea a number of times, including in his book Common Sense on Mutual Funds. What’s that? In a 1991 article for the Journal of Portfolio Management, Vanguard Group founder John Bogle-who died in January 2019-laid out a relatively straightforward method for estimating stock returns.

But we can at least think about it in a reasonably logical way-by using what some folks call the Bogle method. stock returns we can expect over the next 10 years? Nobody knows for sure, of course.

Jack bogle common sense investing