RE: Most investers thought the question meant "TOTAL" return, not "ANNUAL" return since it was not stated in the poorly worded survery.
If they expect 34% total return over 10 years, then they are expecting annualized returns of 3% a year, i.e. passbook returns! Clearly, that doesn't make sense. Even if it is over 5 years, the annualized returns are 6% a year, which is close to the return of a completely risk-free 5-year T-Bill...
The Mean expectation for annual return is much closer to between what we have been seeing the past few yrs and what financial planners use (10%/Yr)so Joe Public isn't as stupid as some think....
I really doubt it. Here is an excerpt of an interview with Jordan Goodman of "Money" magazine conducted sometime last year :
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[...]
I was doing a radio show in Kansas City recently
and this woman had gotten into 20th Century
Ultra, which is probably about the most
aggressive mutual fund you can get. And it was up
about 50 percent last year, something like that.
So she said, "Even if I don't get 50 percent,
it's okay if I get 25 percent. That's okay." I
said, "Well, how about if it went down 25
percent." "No, no. Not down. I'm not greedy. I
don't have to get 50 percent." Well, in these
people's minds the idea of it going down 25 or 50
percent is nonexistent. So that's what worries me
a little bit is that they can get too kind of
carried away with the enthusiasm and not realize
you can actually lose money, not that you'll make
less. That's a very big difference in the way you
think about investing in mutual funds.
[Q]They have high expectations?
[A]People do have high expectations and you can
see it in the kind of cash flows into mutual
funds. The money is going where it's been hottest
-- technology funds. They see these records,
50-60 percent in the last year or so, and they
want to jump in.
[...]
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