Investment expectations

ReportInvestor

All you can be sure about is that the experts' expectations for the next five years will almost certainly be wrong

There are no guarantees (although it is still usually wise to invest rather than not to invest ).

jem16

ReportInvestor wrote:

More smokescreen & now a few casual insults as well. Ho hum.

Where is dh?

Perhaps his wife is fed up being an MSE widow.

ReportInvestor

It hasn't stopped him in the past .

IME it's unwise to attempt to judge others' relationships. There are usually deep, hidden undercurrents not apparent to the casual observer.

ReportInvestor

prudryden wrote:

Before anyone ask, I am registered with the FSA and the SEC as an Investment Manager and authorized to give investment advice.

It's worth putting that in your signature, Pru, so that everyone knows where you stand. It's the usual MSE form for mortgage Advisors and IFAs

Can you say to a client after 10 years of 15% pa compounded growth that you have achieved 30% average growth?

I'd be interested to know.

ReportInvestor

I'm not "attacking" dh.

I just want to know what he means when he says to a client - or to MSE readers - that he hopes for 10% growth over 5 years.

We are all entitled to know.

It's pretty basic else we are all in the dark given that dh is a major player on these forums.

And it's hardly "hijacking" a thread whose title is "investment expectations"

I'll say no more until dh replies and clears up his position.

jem16

ReportInvestor wrote:

It hasn't stopped him in the past .

IME it's unwise to attempt to judge others' relationships. There are usually deep, hidden undercurrents not apparent to the casual observer.

Eh????

Is that a serious remark?

My comment was meant to be frivolous - hence the smiley.

Dunstonh has only been "missing" for a few hours. He may just be enjoying some quality time with his family, not hiding.

EdInvestor

I think it's important to understand what's meant here.

If you invest 10,000 pounds @10% annual growth over 1 year, you will get 11,000 back, ie a profit of 1k.

But if you invest 10,000 pounds @10% annual growth over 5 years, you will get 16,105 pounds back, an additional 1,105 pounds.This is due to compounding.You get "growth on the growth".

The concept of "average returns" mentioned seems to suggest that investors are being told to expect 5 X 1k = 5k total profit.

If this is so (it may be a misunderstanding), it is misleading.

It's certainly a valid question.

ReportInvestor

prudryden wrote:

As Dh says, it is just the way it is done by Morningstar and all other independant organizations to compare performance of funds (whether they are trackers, corporate bond funds, stock funds etc.)

Except it's not and dh is simply wrong.

If there were a better way - then I expect these organizations would have found it by now.

They have.

See these figures for Fidelity
Freedom Fund

Total ten year return = 73%
Average Annual Total returns = 5.85% (not 7.3% as per dh's "method")

Source for the figure - Morningstar.

EdInvestor

Prudryden

prudryden wrote:

Dh has taken the total return after 5 years and gone backwards in time to get an average annual return. E.Q. You invest in year 1 £10,000 in an Emerging Market Fund. It was a bad year and at the end, you had a paper loss of 20%. You now have £8,000 net value - the next year is a very good year and it goes up 40% (your net value now is £11,200 for a net gain of 12%) Going backwards in time - you have an average over the two years of 6% average annual return.

Advisors are required by the regulator to provide forecasts on the basis of mandatory set percentages.A 6% annual return would be assumed to produce a return in year 2 of £11,236, not £11,200.

To obtain the latter result you would only require a return of 5.83% a year.

ReportInvestor

prudryden wrote:

Total capital gains return =5.575 average annual return

Where do you see total ten year return = 73%

You haven't stooped to fabricating figures now to gain attention

Thanks for those figures in your last post but one, Pru.

But see here for confirmation of the ten year 73% total return

It's not a difficult mathematical concept, surely?