A Bear Market Lesson About Bullish Projections

Law360, New York (July 24, 2009, 11:35 AM EDT) -- The recent turmoil in stock markets has caused shell-shocked investors and financial professionals to cast a jaundiced eye on historical equity returns.

The 10-year period of January 1999 through December 2008 has been called the “lost decade” of investing, since most stock indices are negative for the period. Should pension plans and other investors scale back their assumptions about future stock market returns? Surprisingly, the answer may be “no.”

In the present climate, investors can easily fall into the trap of assuming historical returns are just...
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