A broadly diversified US equity fund like VTSAX had a CAGR of 10.25% from 2003 to today. That's a hair over the 10% that underlies many projections about retirement investment.For the past 15 years it's been compounding at half the rate everyone was expecting it to
Yeah but pension funds don't get to go "pile it all into SPDR" because diversification is a hedge against disaster. Take it further: VTSAX is at 17% for the year! Yet CALPERS made 6.7% which is under their 7% goal. And thing is, once you miss a goal you don't get a do-over. So why don't they pile into index funds like everyone else? Index funds that buy what works? How 'bout some of those marvelous tech stocks? I mean, what could go wrong? After all, things with the Nifty Fifty worked out so well: So yeah. If you're golden in 2013, and you don't touch it, and you don't have greater expectations, and you needed to make 10.25% that you could get out sixteen years later, VTSAX works out fine. But if you live in the real world, your goal has been 6-7%. And you've been making 3-4%. And the PBGC has $1.7T in insurance, an annual budget of $423m and there are 19 trillion dollars worth of pension obligations in the United States. Which, by the way, now generates 95% of all the positive-cash-flow bonds in the world.