Expected Returns

[big-papa]

Here's Blockrock's crystal ball. It's for the next 5 years and the returns are given as nominal returns.
https://www.blackrock.com/institutions/en-us/insights/portfolio-design/capital-market-assumptions

 

[Danmar]

I can't figure out why anyone who is retired cares about expected returns? The most important decision is your SWR and this will almost certainly depend on your actual results and spending needs. I guess if you are trying to leave a certain size legacy? Even if you were certain about future expected returns, sequence of return risk would still be important. and drive your SWR. Maybe AA?

Agree that those in accumulation phase would have more interest.

 

[NW-Bound]

If the returns are expected to be higher, I may feel more confident going to a higher WR.

If the returns are not going to be that hot, that helps me write more covered calls with a strike price set just high enough that they will expire worthless and I keep the premiums, hence goosing my total return.

 

[RobbieB]

I have no interest in "expected returns", only real ones.

I don't use a crystal ball and I don't look at other peoples either. I look at my monthly statements and go from there.

Don't read blogs, don't read financial forums, don't buy newsletters either.

 

[Danmar]

If the returns are expected to be higher, I may feel more confident going to a higher WR.

If the returns are not going to be that hot, that helps me write more covered calls with a strike price set just high enough that they will expire worthless and I keep the premiums, hence goosing my total return.

Perhaps, but you have a lot more confidence in the forecasts than I would.

 

[Danmar]

I have no interest in "expected returns", only real ones.

I don't use a crystal ball and I don't look at other peoples either. I look at my monthly statements and go from there.

Don't read blogs, don't read financial forums, don't buy newsletters either.

Agree. Other than this forum of course.

 

[Totoro]

We're all walking across a foggy bridge with an unknowable maximum load, which in itself is dependent on the climate and weather.

Looking through the fog assessing potential scenarios and their rough likelihoods helps me figure out whether I should put on an extra jacket or whether it is safe to jump and down (for fun).

Or some sort of different analogy ..

 

[kcowan]

Ex-US would have about the same volatility as US stocks with 6% higher returns. Quite a statement.

Yes I adjusted my results to eliminate USD exchange gains. This keeps the underlying returns in perspective.

I also count on 7% returns and 4% withdrawals. Last year was 11.2 and 1.8 actual so lots of room for a future downturn.

 

[Danmar]

We're all walking across a foggy bridge with an unknowable maximum load, which in itself is dependent on the climate and weather.

Looking through the fog assessing potential scenarios and their rough likelihoods helps me figure out whether I should put on an extra jacket or whether it is safe to jump and down (for fun).

Or some sort of different analogy ..

What are you doing out in the fog? Seriously, is a percent or two change in somebody's long term forecast really going to change your behaviour?

 

[Totoro]

We all are in the fog - prediction is impossible. Bad analogy, apologies.

If nearly everyone lowers their forecast 2 percentage points below mine it would prompt me to strongly recheck my own assumptions.

Behavior change would follow if I agree. I don't mind going against the grain but do use it as an indicator.

 

[Danmar]

We all are in the fog - prediction is impossible. Bad analogy, apologies.

If nearly everyone lowers their forecast 2 percentage points below mine it would prompt me to strongly recheck my own assumptions.

Behavior change would follow if I agree. I don't mind going against the grain but do use it as an indicator.

Even if you were in possession of actual results that were quite different? I wouldn't change my plans which are firmly based on my actual results.

 

[Totoro]

Yes.

Past results are an indicator obviously, but I wouldn't expect bonds (as an example) to perform the same as it did the past 30 years.

 

[Danmar]

Yes.

Past results are an indicator obviously, but I wouldn't expect bonds (as an example) to perform the same as it did the past 30 years.

Good point, I don't have any bonds. My pension is my FI proxy.