Understanding pension pot calculation

bigadaj

ry50 wrote: »

I guess i'll have to report back in 5 years!! I've picked 4 trusts and will just stick everything in there and leave it

I think you've primailry missed out the potentially devastating effect of inflation, for those prepared to invest and take on higher risk then the last decade has been a nirvana, with net increases almost unmatched in history. This does ignore the relative lack of increase in true value, ie currencies have effectively been devalued, as teh next stage after central banks and governments have failed to ignite inflation and had to push QE and so inflate asset prices. The U.K. Government has unusually been very successful in reducing currency worth, meaning as a uk based international investor you've seen sterling denominated returns far higher than someone in the us or eurozone.

So you're large increases in fiat currency haven't actually meant that you can get that much more on physical assets in many areas.

bigadaj

dunstonh wrote: »

With hundreds of years of history behind us, the long term average returns, net of inflation, are broadly similar. The longer you are invested, the closer you get to the long term average. So, yes. it is common sense to look at long term returns rather than short term periods which have been much better than normal.



The last two decades have generally had lower returns than the long term average. Why do you think endowment policies fell short in that period but no period previous?

Nowdays, you hope to double or get close to double your value in 10 years (exc inflation). When I stated 20 years ago, maturities then were getting 4x in 10 years, then fell over time to 3x and now double. Cautious investments are highly unlikely to do double.



The last two decades are closer to 5%p.a. average than 8-9%.




if you have a bespoke portfolio of single sector funds then 4 funds is nowhere near enough. That would be bad investing. If you have 4 multi-asset funds then that is fair enough.

It is important that when picking your own investments, you understand how things work. Otherwise, misconceptions can lead you do making very bad decisions.

Where do you get hundreds of years from, Barclays equity gilt study goes back no more than 130years and f&c as the oldest it around 150?

westv

bigadaj wrote: »

Where do you get hundreds of years from, Barclays equity gilt study goes back no more than 130years and f&c as the oldest it around 150?

Because we still know how stock markets performed prior to the introduction of indexes??