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Source: Data from Global Financial Data, reprinted with permission.

Source: Data from Global Financial Data, reprinted with permission.

These averages are, of course, nominal because we haven't worried about inflation. Notice that the average inflation rate was 3.2 percent per year over this 75-year span. The nominal return on U.S. Treasury bills was 3.9 percent per year. The average real return on Treasury bills was thus approximately .7 percent per year; so the real return on T-bills has been quite low historically.

At the other extreme, small stocks had an average real return of about 17.3% - 3.2 = 14.1%, which is relatively large. If you remember the Rule of 72 (Chapter 5), then you know that a quick back-of-the-envelope calculation tells us that 14.1 percent real growth doubles your buying power about every five years. Notice also that the real value of the large-company stock portfolio increased by almost 10 percent in a typical year.

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