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Congratulations on taking action so young. The marvels of compound growth will work that much longer for you, or you will retire that much younger. Will your savings rate decline when you have children or more children or older children? If so, all the more reason to sock away what you can now.

You got this advice “plan on beating the market by 1-2% when estimating long term returns, i.e., 12-13%. In light of recent years, anything else would be preposterous.” My advice, on the other hand, is to plan on matching the market's return while also planning on inflation and possible income taxes eroding that return. Please do not make your long term plans based on recent years' performance, but on recent decades' performance instead. I go on (and on) about this subject in my post at http://boards.fool.com/Message.asp?id=1380520000026005

In every time period, the average returns for active traders will be exactly the market's average results in that period. This is mathematically necessary. From their returns, active traders must pay their commissions, spreads, research costs, management costs, taxes on realized gains, etc. etc. I have seen an estimate that these expenses consume one third of the market's return for active traders, or about one hundred times as much as low-cost indexing investors pay. That is a formidable barrier for active traders to surmount.

(I'm not saying that all active traders have beating the market as their goal. Some are intent on achieving less volatility than the market and sacrifice some return for this purpose.)

If you do after all plan to beat the market, I think this must be because you think you have superior stock picking skills, or market timing skills, or skills for selecting financial managers to do this for you, or reliably better luck than other folk. None of that is true for me. When I based my investment decisions of such mistakes, I went broke. When I abandoned the effort to beat the market and went to S&P 500 index investing, I was able to retire within twelve years. I know people have been making fabulous gains that beat mine in the S&P. I caution against betting that this will continue.

Chips, who finds nothing preposterous about accepting the market's returns and volatility
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