Can an investment expert approximate how much £800 pm invested = in 20 yrs

Conrad

My wife and I are trying to get a handle on our investment plans going forward.

Considering a FTSE 100 / 250 tracker with minimal costs, although have not identified a provider yet. Already have some more concentrated investments which are higher risk. Were investing in cash ISA's, but have ceased these for the mo.

Of the £800 per month, £250 each presumably via ISA wrappers.

Now we realise no one has a handy crystal ball, but do any of the more knowledgable people here have a rough idea what the total fund would be worth assuming divis within the fund are automatically re - invested.

Would for example 3 x total premiums paid, be a fair guestimate after 20 years?

purch

Can an investment expert approximate how much £800 pm invested = in 20 yrs

No............................:cool:

debbie42

I'm certainly no expert, but looking at your sig I'd imagine your question is a bit like asking you to predict the approximate mortgage interest rate over the next twenty years. It's a lot easier to know what it was over the past twenty...:rolleyes:

Conrad

Sorry, I meant extrpolating from the last 20 years, what might one conservatively predict as a total fund outcome in 20 years? I cant rely upon providers marketing bumf as they seem to pick specific periods which no doubt are the periods that just happen to put them in the best light.

Someone must have some rough rule of thumb guide as to whether one could expect 2 or 3 or 4 x the total contribution as a return from a FTSE tracker

Mr_Mumble

From 1900 to 2006 the real (after inflation) return for UK equities was 5.2%, inflation (RPI) in Britain for the 20th century averaged 4.1%. So 9.3% average yearly return. However, this includes the two world wars and on a latter 50 year basis the stockmarket has significantly outperformed (6.6% in real-terms). For arguments sake let us assume a FTSE tracker will return 9%pa after charges.

£800 * 12 (1+(.09/12))^240 - 1 / 0.09 } = £534,309.50

The total invested being £192,000 (£800 * 12 * 20). So 2.78x the sum invested.

Of course this number assumes a steady rise in value at 9%pa, that isn't going to happen!

Other caveats: the figure doesn't take into account inflation. Also, it wouldn't make any sense to be putting in £800pm near to a set date of withdrawal.

Personally I wouldn't want to be sticking £800pm into a single tracker. Perhaps into a mix of different indices (e.g. FTSE-100, FTSE-250, Euro Stoxx 50, S&P 500, Topix (Japan), MSCI asia pacific, MSCI emerging markets and a global REIT). The cost would not be much higher. A normal FTSE All-share tracker fund costs 0.50% per annum, foreign trackers shouldn't cost more than 1%pa.

turbobob

Well in the last 10 years (to the end of April 08 anyway) the FTSE All Share index achieved an average annualised return of 4.63% p.a. and the FTSE 100 index achieved 3.51% according to some information I'm looking at at the moment. In that period of course you have an unprecendented 3 years of consecutive drops in both indices. Over the last 5 years its rather better with annualised returns of 13.91% from the All Share and 12.98% from the FTSE 100.

Not sure if I can get the 20 year figures at the moment. The economy we are in is very different from 20 years ago and I can't see it following the same trends as the last 20. Who knows though?!?

King_Weasel

I'm not sure these figures make much sense without taking inflation into account.

Over the last 10 years it seems from turbobob's figures that the FTSE100 has risen by only about 0.7% pa above the RPI, but other periods will produce different results.

It would be reasonable, though, to assume the amounts being invested would also rise with inflation and to make your stab in the dark (can't call it a forecast) in terms of today's money. I suppose you might hope for a real return of at least 2-3% pa on average, provided you don't have a specific deadline for realising the investment. In other words - keep some in cash.

EdInvestor

Long term, the returns from equities equate to a combination of the market dividend yield (typically 3%), plus inflation, plus the economic growth rate.

800 a month of 20 years would accumulate to

325,966 @ an average growth of 5%
408,325 @ 7%
514,765 @9%

Don't forget you have to deduct investment fees and charges from the growth rate.
If your return averages 5%, an annual fee of 2% will amost cut it in half.

Charges matter.