What return are you targeting?

bostonerimus

Prism wrote: »

Those trusts that Aminatidi has mentioned have done a very good defensive job over the long term whereas most of the passive multi-asset funds are untested during crashes and bear markets. For example, I don't want to be in a standard blend of bond funds right now so all of those above are out for me.

I’ve held an equity and bond index portfolio since the early 1990s and been through some pretty rough times. It has worked well enough for me.

Albermarle

Quite a timely article in Trustnet on this

The optimistic expectations are surprising . Although as with all surveys , it depends who they asked .
If you asked the man/woman in the street for their view on future investment returns , you would just get a blank look ,

Prism

bostonerimus wrote: »

I’ve held an equity and bond index portfolio since the early 1990s and been through some pretty rough times. It has worked well enough for me.

To be fair though it sounds like you had larger numbers to play with so could afford to play it how you did. I was in a UK multi asset fund in the 90's and early 2000's and it didn't do much for me at all. The simple fact is that my desired goals are greater than i think a standard blend of passive funds will get me. So I have to try at least something to better that, even if it doesn't work. For the moment, for me at least, that means selective active equtiy funds and no bonds at all (fixed cash savers instead). I am also a higher % into equities than I likely should be.

bostonerimus

Prism wrote: »

To be fair though it sounds like you had larger numbers to play with so could afford to play it how you did. I was in a UK multi asset fund in the 90's and early 2000's and it didn't do much for me at all. The simple fact is that my desired goals are greater than i think a standard blend of passive funds will get me. So I have to try at least something to better that, even if it doesn't work. For the moment, for me at least, that means selective active equtiy funds and no bonds at all (fixed cash savers instead). I am also a higher % into equities than I likely should be.

In the early 1990s I was just starting out. My balance was a few thousand dollars. I saved aggressively and have averaged almost 9% annual return. There are certainly many routes to success, but some are more complex than others.

MaxiRobriguez

Aminatidi wrote: »

Quite a timely article in Trustnet on this

https://www.trustnet.com/news/7457616/investors-forecast-returns-of-10.7--millennials-expect-more-

So, just about everyone - young and old, poor and rich, experienced and non experienced etc etc - everyone is expecting returns more than the annualised average returns over the long term, despite money being cheap and markets at record highs?

I expect negative real returns over the next few years.

Linton

Being retired, the financial plan has determined we need our investments to provide an annual income of £12K at current value from dividends/interest and a capital return also to match inflation for us to live very comfortably for the rest of our days. Any gains beyond that are nice to have but not necessary.


No matter what their situation I suggest people identify what return they need to meet their objectives and ensure they have a pretty unabitious plan to achieve it. Aiming for the highest returns is far more likely to end in disappointment.

Vet

Hopefully at least a few % over inflation!

bd10

Hi Aminatidi,

ok, I did the calculations for my own financial planning:

First, I built myself a little pension / annuity calculator to solve the problem. I started with a final pot and then calculated how much I can draw for x years while the balance is grows at some yield y.

But to get there I needed to build the first step: a savings calculator that shows what the final pot at retirement will be for annual/monthly pension savings/contributions based on some yield assumptions. Here I take the annual savings rate as given.
To make things more interesting, I worked out two variations to solve for average yields required given pot size and years of saving and also how much to save given yield assumptions. Linking both parts together I know what annuity I can pay myself over x years having saved y for z years at an average real rate of returns of xyz :-)

Doing it that way I know what's the minimum I need to save so that I am not undershooting the target pot. That would be dangerous. All else is extra for later or for other investments/pursuits.

With that done, next I needed to find out what return assumptions are realistic based on long term (30+ years) performance of asset classes: equities, bonds, etc. When re-sampling things many times over I get a distribution of past returns. I tend not to take the mean estimate but a bit less, to err on the side of caution.

Lastly, when I know which asset classes and markets have performed well, I start picking funds systematically.

Hope that helps answering your question.

Thrugelmir

bostonerimus wrote: »

In the early 1990s I was just starting out. My balance was a few thousand dollars. I saved aggressively and have averaged almost 9% annual return. There are certainly many routes to success, but some are more complex than others.

Trouble is someone starting off today is facing a very different challenge. Following Central Bank intervention to maintain stability in the global financial markets. With dovish appointments and further rate cuts a very real possibility. There's no certainty as to how matters are going to unfold. Around $13 trn of Government debt globally is offering a negative yield. Seems as if many investors are prepared to lose a little rather than a lot.......

bd10

Thrugelmir wrote: »

Trouble is someone starting off today is facing a very different challenge. Following Central Bank intervention to maintain stability in the global financial markets. With dovish appointments and further rate cuts a very real possibility. There's no certainty as to how matters are going to unfold. Around $13 trn of Government debt globally is offering a negative yield. Seems as if many investors are prepared to lose a little rather than a lot.......

Looking at the inverted US yield curve, this may not bode well. The probability of a US recession in a year's time is around 34% as of last week (based on a model of 10y-3m rates). Corporate earnings start to disappoint, purchasing manager indices also disappoint. The negativity has not filtered through in its entirety, but things may well be turning. Those negatively yielding German bonds may look very tempting now, losing a little rather than a lot more.