Vanguard Founder Jack Bogle says he expects stocks to earn real returns of about 4.5% per year for the next decade, and bonds to earn virtually no real return. Bogle divides returns into two categories: investment returns, which are determined by the market’s dividend yield and corporate earnings growth, and speculative returns. Today’s dividend yield is around 2%, and he sees earnings growing at about 5% per year over the coming decade, which would make for a 7% investment return over the next ten years. In terms of the speculative part of the equation, he says price/earnings ratios are around 16 right now, and he doesn’t see that rising or decreasing significantly over the next decade, leaving the total return he expects from stocks to be about 7% annually. Bogle is also expecting about 2.5% inflation over the next decade, which means those 7% or so nominal returns would translate to real returns of about 4.5%, he says. As for bonds, Bogle expects nominal returns of about 2.5%, which, after inflation, means 0% gains.