Real Rate of Return Required for SWR

Secret2ndAccount

Hoenir said:

michaels said:

Where can you get a 5% risk free real return?  

Remains an unanswered question. Is the OP having a rethink ?

OP didn't mention anything about a 5% real return. They based their comments and calculations on real rates in the region of +/-1%

Triumph13

Secret2ndAccount said:

Hoenir said:

michaels said:

Where can you get a 5% risk free real return?  

Remains an unanswered question. Is the OP having a rethink ?

OP didn't mention anything about a 5% real return. They based their comments and calculations on real rates in the region of +/-1%

Yep.  They said they could get a 5% return on cash, and later that they could get a real return on cash (ie >0).  They never mentioned 5% real return.

SouthCoastBoy

NedS said:

I'm happy to hold a good proportion of cash right now (as dry powder), as it's giving a risk free real return whilst equities are at all time highs and helps to offset SOR risks, but I recognise that equities are going to give me the best returns over a 30-40 year retirement period so I will be looking to reduce my cash position either when returns are no longer above inflation and/or equity markets fall.

I'm also in the camp of holding cash, currently it is 40% of my portfolio, however over the next ten years I intend to use cash only and not cash in any equities, therefore by the time I'm 70 the cash percentage will be substantially less.

Albermarle

SouthCoastBoy said:

NedS said:

I'm happy to hold a good proportion of cash right now (as dry powder), as it's giving a risk free real return whilst equities are at all time highs and helps to offset SOR risks, but I recognise that equities are going to give me the best returns over a 30-40 year retirement period so I will be looking to reduce my cash position either when returns are no longer above inflation and/or equity markets fall.

I'm also in the camp of holding cash, currently it is 40% of my portfolio, however over the next ten years I intend to use cash only and not cash in any equities, therefore by the time I'm 70 the cash percentage will be substantially less.

Although from past posts you may still be working at 70 ! 
To be fair being a bit cautious myself, cash at 4 or 5% with no risk seems a not too bad a place to be at the moment ( within reason )

michaels

Albermarle said:

SouthCoastBoy said:

NedS said:

I'm happy to hold a good proportion of cash right now (as dry powder), as it's giving a risk free real return whilst equities are at all time highs and helps to offset SOR risks, but I recognise that equities are going to give me the best returns over a 30-40 year retirement period so I will be looking to reduce my cash position either when returns are no longer above inflation and/or equity markets fall.

I'm also in the camp of holding cash, currently it is 40% of my portfolio, however over the next ten years I intend to use cash only and not cash in any equities, therefore by the time I'm 70 the cash percentage will be substantially less.

Although from past posts you may still be working at 70 ! 
To be fair being a bit cautious myself, cash at 4 or 5% with no risk seems a not too bad a place to be at the moment ( within reason )

Cash is NOT no risk, it has inflation risk.  Not long ago we saw market leading interest rates of below 3% and inflation in double digits, a real loss of 7%.  I bet before the inflation surge those with cash were telling themselves they were getting 2-3% 'return' 'no risk'....

SouthCoastBoy

Albermarle said:

SouthCoastBoy said:

NedS said:

I'm happy to hold a good proportion of cash right now (as dry powder), as it's giving a risk free real return whilst equities are at all time highs and helps to offset SOR risks, but I recognise that equities are going to give me the best returns over a 30-40 year retirement period so I will be looking to reduce my cash position either when returns are no longer above inflation and/or equity markets fall.

I'm also in the camp of holding cash, currently it is 40% of my portfolio, however over the next ten years I intend to use cash only and not cash in any equities, therefore by the time I'm 70 the cash percentage will be substantially less.

Although from past posts you may still be working at 70 ! 
To be fair being a bit cautious myself, cash at 4 or 5% with no risk seems a not too bad a place to be at the moment ( within reason )

There is that possibility, but hopefullynot,j
, just so used to having a monthly wage, it has become my comfort blanket.

MK62

michaels said:

Albermarle said:

SouthCoastBoy said:

NedS said:

I'm happy to hold a good proportion of cash right now (as dry powder), as it's giving a risk free real return whilst equities are at all time highs and helps to offset SOR risks, but I recognise that equities are going to give me the best returns over a 30-40 year retirement period so I will be looking to reduce my cash position either when returns are no longer above inflation and/or equity markets fall.

I'm also in the camp of holding cash, currently it is 40% of my portfolio, however over the next ten years I intend to use cash only and not cash in any equities, therefore by the time I'm 70 the cash percentage will be substantially less.

Although from past posts you may still be working at 70 ! 
To be fair being a bit cautious myself, cash at 4 or 5% with no risk seems a not too bad a place to be at the moment ( within reason )

Cash is NOT no risk, it has inflation risk.  Not long ago we saw market leading interest rates of below 3% and inflation in double digits, a real loss of 7%.  I bet before the inflation surge those with cash were telling themselves they were getting 2-3% 'return' 'no risk'....

True, but inflation poses the same risk to most assets, not just cash.......

OldScientist

MK62 said:

michaels said:

Albermarle said:

SouthCoastBoy said:

NedS said:

I'm happy to hold a good proportion of cash right now (as dry powder), as it's giving a risk free real return whilst equities are at all time highs and helps to offset SOR risks, but I recognise that equities are going to give me the best returns over a 30-40 year retirement period so I will be looking to reduce my cash position either when returns are no longer above inflation and/or equity markets fall.

I'm also in the camp of holding cash, currently it is 40% of my portfolio, however over the next ten years I intend to use cash only and not cash in any equities, therefore by the time I'm 70 the cash percentage will be substantially less.

Although from past posts you may still be working at 70 ! 
To be fair being a bit cautious myself, cash at 4 or 5% with no risk seems a not too bad a place to be at the moment ( within reason )

Cash is NOT no risk, it has inflation risk.  Not long ago we saw market leading interest rates of below 3% and inflation in double digits, a real loss of 7%.  I bet before the inflation surge those with cash were telling themselves they were getting 2-3% 'return' 'no risk'....

True, but inflation poses the same risk to most assets, not just cash.......

You're right with 'most', AFAIK the only relatively easily available exception are inflation linked gilts (now real yields are positive again I wonder whether NS&I will reintroduce inflation linked savings bonds).

However, I do hold 20% cash in my portfolio (in the form of rolling 1 year fixed rate accounts) but this is to help shorten the duration on my fixed income holdings and to protect against deflation. Since fixed income is the only area of my portfolio I allow myself to be mildly 'active', this fraction has already fallen and is likely to fall slightly further assuming the yield curve becomes less inverted.