Japan should be a good indicator of this.

Still some premises have worked for the longest time. If it is true that the Richest Man in Babylon was transcribed from tablets found from Babylonian times, what it says should work for now.

Talk to your grandparents and they will tell you a much different story than the financial world has sold everyone. An average return can be VERY bumpy.

By the way, the reasons you mention are why I worked to move from a technical role to be a business analyst and a project manager. Today I write software specifications and manage projects. Communication skills (+design and problem solving) are key, but they are even more important as jobs are outsourced.

Some people don’t want to pay their house off, for fear of losing the mortgage interest deduction. Um, you’re spending $100 in interest to save $25 on your taxes – net loss of $75 on that deal. I can understand other arguments against paying off a house – such as the belief that you can get a better return by using the money in a different manner – but the mortgage interest deduction argument is typically a misunderstanding of deduction vs. credit.

I took a retailing class in college. My prof told a good story. When she and her husband went to trade shows and such, they stayed at modest hotels. Her local competitor stayed at high end places, since the expense was tax deductible.

One woman still has her store, the other hads long since gone out of business. Can you guess which one survived? :)

History definitely is not good indicator of future performance especially if that future isn’t that much smaller than the historical reference we’re comparing to. For example, we know that the Dow Jones has only been around for what, 100 years or so? And we’re betting that we know what’s going to happen in the next 40 years based on 100 years? I don’t think so. That’s like winning 10 hands of black jack and thinking that you’re going to win the next four.

- Slacker
http://www.theslackermethod.com

I think there is a very good chance that stocks will give 8-10% return over the long run, but it’s a good idea to keep your eyes open and be aware of the financial environment, rather than stick your head in the sand and assume a strong return.

Similarly, I think that it’s likely that economies will grow over the long term, and I’d be interested to know whether investing in the stockmarket in Japan would have produced worse results that sticking the money in a (very low interest) Japanese savings account.

Maybe history won’t repeat itself, but I’m at a loss to know how that means that our tactics should change. It doesn’t really matter whether the stockmarket performs better or worse over the next 20 years, it matters whether it’s likely to perform better or worse than the alternatives. The more unsure we are, the more we should diversify I guess.

In short, spending less than you earn (or earning more than you spend) and saving and investing the difference is the only game in town. Diversification is one of the best ways of reducing risk. It’s actually deadly serious that continuous learning and development required in the information age. All of this is true now, but it was also true a year ago, and two years ago. It’ll still be true in a years time and two years time regardless of the markets.

So what makes this time any different? Maybe something, maybe nothing. Like you say, it could be different this time around, but I trust we’ll still see 8% over the long term.