Money For the Rest of Us

Indexing Bubble and Asset Class Returns Still Revert to the Mean

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Dec 11, 2024
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INSIGHT

Reversion to the Mean

  • Extreme outcomes, like exceptional stock returns, often revert to the average.
  • This is a key financial concept called reversion to the mean.
INSIGHT

Impact of Passive Investing

  • Passive investing and indexing have become increasingly popular.
  • This has influenced U.S. stock market overvaluation.
INSIGHT

Forecasting Returns

  • Asset returns come from income, income growth, and valuation changes.
  • Use these factors to forecast long-term returns, contrary to some beliefs.
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