No. of Recommendations: 2
Just to be clear, this FOTH discusses two different benchmarks: 15% earnings growth for businesses and 15% investment return target for investors.

My idea of a great LONG term earnings growth is 8% (i'm thinking KO). A person would have to be innumerate to not find SUSTAINABLE 15% earnings growth ridiculous in the extreme. 15% returns on capital are not ridiculous, however, regardless of earnings growth. But i digress...

I have some thoughts on why 15% average annualized return is a common goal for the individual investor:

* If you believe that the long term average return for equities is 11% (i don't, but many do), then 15% is a nice round number to shoot for if you're trying to beat the market. As Mr. Mann pointed out, 13% returns ain't exactly chicken feed... but 13 is such an unlucky number... better make it 15.

* Your money doubles almost exactly every 5 years at 15%. It "only" doubles every 5-2/3 years at 13%. Round number thing again. Makes it easier to figure up how long it is going to take you to get rich.

* The man who is deified (rightfully, imo) in the investment world has long had 15% annualized investment returns as his goal. He happens to have done a great deal better than that so far, actually. He is the standard for many.

Anyway, i agree that 15% is a difficult target. I do not believe it is impossible. I think it really comes down to the times in which you live, how patient you are, and your capital base (not a significant factor for the vast majority of participants). If "mr. market" is really emotional, then 15% is probably doable. In times of relative economic stablity, i understand that prices are pretty rational*. 10% returns might look good in this situation.

So, i guess the questions are:

1. Should an investor wait for the market to give a price that will offer 15% returns?

2. If so, how long should that wait be?

3. What if the market has learned something, finally, and never offers such a price on any business worth owning?

4. Would it have been better to shoot for lower returns to start with?

i guess the answer to #3 is the rub.

Sorry for the desultory style, i'm sort of hashing out some ideas i've had in my head lately. I am interested in others' thoughts...



*from Security Analysis, 1st ed., iirc.
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