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Real return going forward
Old 04-09-2006, 12:05 AM   #1
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Real return going forward

Most of know what the equity and bond markets have averaged over the last 100 years. We also know about the highs and lows of inflation in the past* FireCalc is a great tool using data from the past to guide us.

Fairly recently we have seen real estate go sky high and gold taking off beyond what most ever expected. Stocks crashed, many stocks have come back.

Knowing what we know and including other external factors some discussed here such as the Federal deficeit, the war in Iraq, unfriendly CEO's, political differences, medical costs gone wild, interest rates on the rise, etc etc etc.

What real return do you expect with you allocation? What % above inflation do you expect to gain with all your assets, or what % below inflation do you expect. (lets say over the next 20 years).
Gotta use your own estimate of inflation.

I wonder if it will be what it was.

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Re: Real return going forward
Old 04-09-2006, 06:01 AM   #2
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Re: Real return going forward

im shooting for the 4% above inflation with my 55/45 mix of stocks,bonds and commodities...since im running higher than that for the last few years i expect a drop back to the averages ,at least for me
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Re: Real return going forward
Old 04-09-2006, 07:34 AM   #3
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Re: Real return going forward

I'm shooting for same - 4% above inflation - rougly 50% stocks, 20% bonds, 20% RE/reit, , 10% commodities/cash* *Of the stocks, around 1/2 of that allocation is international.

Who knows what the future.* *My major focus is trying to diversify against less-correlated asset classes and choices.

However you read John Maudlin's article this week - he believes "everything is interconnected" - and a US meltdown will affect everything.

http://www.frontlinethoughts.com/
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Re: Real return going forward
Old 04-09-2006, 09:29 AM   #4
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Re: Real return going forward

for planning purposes, I use 4.5% real return for equities, 2% for bonds -- hopefully conservative
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Re: Real return going forward
Old 04-09-2006, 10:32 AM   #5
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Re: Real return going forward

Quote:
Originally Posted by GTM
I wonder if it will be what it was.
I don't think it will.

Quote:
Originally Posted by GTM
Gotta use your own estimate of inflation.
"Triumph of the Optimists", published in 2002, quotes 3% over the last century and 5% over the last 30 years (courtesy of 1972-1982).

Quote:
Originally Posted by GTM
What real return do you expect with you allocation? What % above inflation do you expect to gain with all your assets, or what % below inflation do you expect. (lets say over the next 20 years).
The Gordon equation (with highly sensitive variables) and a bunch of other "wise men" are hypothecating 6-7% (before inflation). TOTO thinks the risk premium for stocks will be about 5%.

We can live with that. Especially considering that last year was a good bit higher...
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Re: Real return going forward
Old 04-09-2006, 11:00 AM   #6
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Re: Real return going forward

4% pretax real return on a 50 - 50 balanced, diversified portfolio over the next 30 years. *Actual results likely to be between 0% and 8%. *If 0%, my planned 3% inflation adjusted withdrawal rate will zero my portfolio in 33.3 years, plus or minus depending on the timing of the ups and downs. *
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Re: Real return going forward
Old 04-09-2006, 01:45 PM   #7
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Re: Real return going forward

Quote:
"everything is interconnected" - and a US meltdown will affect everything.
It probably is and it probably will.

I am thinking in terms of 6% pretax, before inflation, and 3% inflation--but afraid that inflation will be higher.

I am diversified roughly 50/50 US/foreign stock mutual funds and, at the moment, am thinking of using Galeno's method in retirement--taking 4% out of equities every year, to go into a CD ladder. SS will be gravy.
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Re: Real return going forward
Old 04-09-2006, 03:49 PM   #8
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Re: Real return going forward

7.22578 with a CPI factor of 3.22% and a real local inflation rate of 6.5575% for me.
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