(Very) rough estimates for expected rate of return?

zolablue25

BananaRepublic wrote: »

That's quite some crystal ball you've got. The truth is we don't know, but I would expect huge advances in medicine and AI, self driving cars, electric cars, maybe even nuclear fusion in 40 years time (1). And then there are advances we cannot even conceive of because the discoveries have not been made.

(1) 40 years ago nuclear fusion was 40 years away. Ever since, it has been "40 years away".

Tend to agree with this. The rate of technological change has increased over the last 20 years not decreased.

pledgeX

Thanks for the feedback all. Couple of points:

- I'm not only investing in the FTSE All share index, this was just an example. I already invest in a company pensions scheme and I also save separately into a stocks and shares ISA. The all share is just one of the trackers in my S+S ISA.

- I absolutely understand that saving as much as possible is the best option, but there's a balance. I could pile 90% of my disposable income into the ISA and live like a hermit for the next 10-20 years, but that will be no fun and I could end up saving more than enough money, by which time I'd be too old to enjoy it.

- For those estimating that they only think their funds will only just beat inflation. Is that being ultra pessimistic? Surely most cash ISA's wont be far off achieving that and there's no risk involved in that...

bowlhead99

pledgeX wrote: »

- For those estimating that they only think their funds will only just beat inflation. Is that being ultra pessimistic? Surely most cash ISA's wont be far off achieving that and there's no risk involved in that...

Other than short term marketing from the banks, there's no reason to expect that cash deposit products would be able to beat inflation because you are putting your money in a box and asking someone to guarantee that it will be there when you come back with no possible chance of failure ; so anything they can do with the money in the interim is not going to be richly rewarding and after their costs of running their banking business they are not going to want to offer you any more than your money back in real terms, or less.

Whereas as mentioned above if you buy into someone's business or lend them money to do business you're taking a risk that you won't get it back but your reward is a share of their profits (or what would have been their profits if they hadn't agreed to pay it to you as loan interest). As business is (generally) profitable your piece of the business success should broadly do better than leaving money in a savings box and not taking a piece of any business. Because with savings, the business and growth stuff just passes you by and you're forever a customer, not an investor.

So there is no issue with saying investments should outperform cash, and at least just beat inflation rather than be beaten by inflation, but it is a question of degree. The returns of 1970 to 2015 won't necessarily be equalled by the returns of 2015 to 2060, because of changing demographics and rate of technological change.

Thrugelmir

BananaRepublic wrote: »

That's quite some crystal ball you've got. The truth is we don't know, but I would expect huge advances in medicine and AI, self driving cars, electric cars, maybe even nuclear fusion in 40 years time (1). And then there are advances we cannot even conceive of because the discoveries have not been made.

(1) 40 years ago nuclear fusion was 40 years away. Ever since, it has been "40 years away".

My late grandmother was born in 1898 in the reign of Queen Victoria and died in 1997 just shy of her 100th birthday. Just think what she saw........ Motor Cars, Aeroplanes, Tanks, Ocean liners, Jumbo jets, Space Rockets, man on the moon, atomic bomb, diesel engines, the escalator, radio receivers, television, sonar, plastic, loudspeakers, jet engine, photocopiers, ball point pens, mobile phone, black box, pace maker, atm, computer...........

N1AK

pledgeX wrote: »

- For those estimating that they only think their funds will only just beat inflation. Is that being ultra pessimistic? Surely most cash ISA's wont be far off achieving that and there's no risk involved in that...

I think most people would consider it very pessimistic. I tend to advocate projecting based on your informed opinion of the most likely performance and a more conservative one. This can then be used to model various scenarios. If your target income is just enough to survive on then clearly you need to handle risk different than a couple who are heading towards £80k pa in retirement already.

I model based on 4% above inflation and 1.5% above inflation as my conservative estimate. The conservative value would get lower as the time period I'm interested in gets shorter.

N1AK

Thrugelmir wrote: »

My late grandmother was born in 1898 in the reign of Queen Victoria and died in 1997 just shy of her 100th birthday. Just think what she saw........ Motor Cars, Aeroplanes, Tanks, Ocean liners, Jumbo jets, Space Rockets, man on the moon, atomic bomb, diesel engines, the escalator, radio receivers, television, sonar, plastic, loudspeakers, jet engine, photocopiers, ball point pens, mobile phone, black box, pace maker, atm, computer...........

And... there's no reason aside from lack of imagination to believe technological progress has declined; I'm sure someone who lived through the industrial revolution would struggle to imagine how things could change even faster.

Malthusian

Thrugelmir wrote:

Nor are we likely to see the same rate of technological change in the coming decades.

Sounds like exactly what they said at the end of the First Industrial Revolution, immediately before the Second Industrial Revolution.

Just think what she saw........ Motor Cars, Aeroplanes, Tanks, Ocean liners, Jumbo jets, Space Rockets, man on the moon, atomic bomb, diesel engines, the escalator, radio receivers, television, sonar, plastic, loudspeakers, jet engine, photocopiers, ball point pens, mobile phone, black box, pace maker, atm, computer...........

The Internet, smartphones, GM food, stem cell therapy, lighting up a chalice, Wee Willie Harris... wait, wrong song. Quantum computing, (reliable) videoconferencing, satnavs, search engines, mobile banking, facial transplants, lithium batteries, driverless cars, and I didn't even have to venture into useless inventions (like the atomic bomb or landing on an airless satellite before another superstate did it first). And I can stop there because there's no reason your reincarnated grandmother (if the Hindus are correct about that stuff) wouldn't see the same number of inventions in the remaining 80% of her life.

eskbanker

Malthusian wrote: »

lighting up a chalice, Wee Willie Harris... wait, wrong song.

Reasons to Open a Santander 1-2-3?

Eco_Miser

Thrugelmir wrote: »

My late grandmother was born in 1898 in the reign of Queen Victoria and died in 1997 just shy of her 100th birthday. Just think what she saw........ Ocean liners, diesel engines, the escalator, radio receivers,

Those four actually pre-date your grandmother.

I could write an equally long list of things I have seen in my not-yet-complete lifetime (but Malthusian has done it for me).
Computers have gone from huge machines occupying whole floors of university buildings, to little blobs of silicon seemingly controlling every aspect of our lives.
I see no reason why technological change should not continue at the same rate, or even accelerate.