Your investing expectations are more than double the reality. Here is the tough truth.

By Mark Hulbert

Long-term real returns above 10% annualized are exceedingly rare

Many investors believe that stocks will bring guaranteed inflation-beating riches.

How likely is it that over the next several decades you will do better than both the best investment newsletter and the best equity mutual fund?

U.S. investors, on average, expect their portfolios to beat inflation over the long term by 12.6% a year. And that's just the average, meaning that many expect much more. But even at 12.6%, this expectation is almost certainly more than double what is actually realistic.

The U.S. stock market's total return above inflation since 1793 has been 6.1% annualized, and broad-market indexes such as the S&P 500 SPX will, if history is any guide, outperform 90% of investor portfolios. So even if individual investors do as well as the broad stock market - a big assumption - odds are overwhelming that they won't come close to beating inflation by 12.6% annualized.

The chart above reflects the performance of the investment newsletters my performance-auditing firm has been tracking over the past 46 years (through June 30). Few newsletters have been published over this entire period, but the one with the best record has outperformed the U.S. consumer-price index by 11.7% annualized. The best U.S. stock mutual fund over this same 46-year period performed about the same - beating CPI inflation by 11.4% annualized.

Ask yourself this question: How likely is it that over the next several decades you will do better than both the best investment newsletter and the best equity mutual fund?

An investment in Warren Buffett's Berkshire Hathaway's stock (BRK.A) (BRK.B) has done better, producing a total real return since June 1980 of 15.4% annualized. But this is an exception. Buffett has even conceded that because Berkshire Hathaway has grown so large, it almost certainly will not perform as well in the coming decades. Furthermore, as I discussed in a column in January, it's exceedingly unlikely that you will discover the next Warren Buffett - if another were to ever come along - in time to beat inflation by anything close to 15.4% annualized over the long term.

A note about 'The Prudent Speculator' newsletter

I've received a number of emails in recent weeks about The Prudent Speculator, which is the newsletter with the best 46-year record mentioned above and plotted in the chart. It appears to have ceased publication in April, and according to a May press release, longtime editor John Buckingham co-founded a new firm that plans to launch a new value-oriented newsletter later this summer. Hulbert Ratings continues to track the performance of Buckingham's former model portfolios as of their last known publication in April, and anticipates connecting the track record of his new newsletter to those previous ones.

Note also that, like all other newsletters whose returns are audited by my firm, The Prudent Speculator pays a flat fee to be audited. Because all monitored newsletters pay the same flat fee, my firm has no incentive to skew any newsletter's returns better or worse than another.

Mark Hulbert is a regular contributor to MarketWatch. His Hulbert Ratings tracks investment newsletters that pay a flat fee to be audited. He can be reached at mark@hulbertratings.com

-Mark Hulbert

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07-06-26 1719ET