What is a realistic return for a 5 yr investment ?

Happychappy

Bowlhead

Thank you very much for your very detailed reply, you are absolutely right on his attitude to risk and the kicking the can down the road analogy.

His thinking is similar to many posters responses as to what he can expect, I.e. 5% not really achievable without greater risk! therefore he is getting around 2% now, so for another 2 or 3% costs through advice! setting up and management fees! he doesn't see the benefit of putting his capital at risk! my view is he needs to dip his toe in the water! or he will forever be can kicking !

masonic

beancurd wrote: »

Is that 2% before or after inflation? Make a big difference.

The first post says 2% gross, so I'd assume that is an interest rate and that tax will be deducted from the interest before even considering inflation.

Even taking the best 5 year fixed rate at a little over 3%, the value is unlikely to grow at all in real terms.

robatwork

Excellent, I got a mention in a Bowlhead post.
My work here is done!

badger09

robatwork wrote: »

Excellent, I got a mention in a Bowlhead post.
My work here is done!

Well done:T

Will you now change your username to robnolongeratwork

cepheus

Happychappy wrote: »

Hi

what what be a realistic annual return on his capital, he is not a great risk taker, but realises investment is a risk, however, he would except a low to medium risk, which in his understanding would be losses around 10% ?

I know there is no easy answer, but from years of experience, what would be a conservative % return he could expect, and would this be achieved! bonds! equities ?

He will be a 20% tax payer when he returns! His pension is between 20 - 24k gross, he has his property in the Uk, car etc, so no great outlays, which is why his pension should about cover everything, he also has around 50k nett in building societies for a rainy day account, I.e years of cash ISA's

Obviously subject to any returns he makes, this may put him into a higher band, but looking at the returns of safe savings on offer in the region of 2% gross, the building society route is not favourable! he has not used his S&S ISA allowance

Thanks HC

According to this report and assuming it's invested in the UK see page 55 top right.

the long-term real return [this means ahead of whatever inflation is] on UK equities was an annualized 5.2% as compared to bonds and bills, which gave a real return of 1.5% and 1.0% respectively.

So the mean gross five year compound figure based on those long term returns is 27%, 7.7% and 5.1%. No doubt we could add +/- 50% on that for equities!

Of course it's all different today and he should get far more

robatwork

badger09 wrote: »

Well done:T

Will you now change your username to robnolongeratwork

The irony is I never post from work as I am way too busy trying to earn enough to practice some of bowlhead's theories. I still actually stand by my idea - if I had £500,000 kicking around I would definitely gamble some of it in equities and some of it in....50/50 gambling.