As for the monkey, a pair of dice ought to do it.

Use them to pick (say) 30-100 stocks in any handy index.


This is actually the way most of us invest, with the added theatre of actually guessing future prospects, pretending to do some calculations, using some other heuristic like quality of management, etc. Then we get the average 6.5% a year and think we're stockmarket tycoons.


For those insisting on buying an index fund, a reasonable expectation for your forward real total return is the initial nominal dividend yield, plus the real GDP growth rate during your period of ownership, [plus or minus a one-time amount for the valuation change between your start and end dates, annualized across that period], minus about 1%/year. The 1% is the drag from the way US cap weight indexes are constructed and reconstituted, and a few basis points for fund costs.


By index funds, I'm sure Jim means funds where the index is weighted by market cap, meaning ALMOST all index funds. There are also index funds that are equal weight, like S&P 500 Equal Weight Index Fund, Nasdaq 100 Equal Weight Index Shares, and Russell 1000 Equal Weight Index Fund. For these, you would not need to subtract the 1%/year, but you would likely need to add a small amount for the management fee, since they require a bit more work (rebalancing every quarter, for instance.) As an example, the Invesco's S&P 500 Equal Weight Index Fund (ticker:RSP) has a management fee of 0.2%, whereas the market cap weighted fund SPY has half the management fee (0.095%), and Schwab's version (SWPPX) has a fee of only 0.02%. Still the equal weight feature is probably worth enough (about 1%) to justify giving back 0.18%.

dtb