Over the last decade to end May 2010, EM Government Bonds returned almost 12% on an annualized basis, EM equities and REITs just over 10%, TIPS returned almost 8%,  US bonds just over 6%, commodities 4%, cash just over 2% and US stocks...nothing. It was possible to own an asset mix that generated high single digit annual returns, so long as you avoided US (and other developed) stocks. Over the very long term the Equity Risk Premium, or the excess return over bonds you got paid for the additional risk, has been 2.5%. Robert Arnott in The Journal of Indexes highlights multiple 20, 30 and even 40 year periods where the average investor would have been better off in bonds i.e. the risk premium did not exist. So earning this mythical risk premium is largely a function of timing, and timing is a function of valuation.  The reality is that the risk premium exists over very, very, long periods of time. In 2000 we began what may be a 16-18 year secular bear/sideways market that followed an 18 year bull market from a historically unprecedented level of equity market overvaluation on normalized earnings numbers. Though timing the exact starting point and ending point of a secular market is next to impossible, it is possible to determine a range based on the duration of the present market movement and valuations. The charts below looks at annualized 10 year real returns subsequent to a range of market P/E multiples; it seems absurdly obvious but is often forgotten that equity returns depend above all else on starting valuation.