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What annual return would you be happy with?
Old 01-27-2012, 11:28 PM   #1
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What annual return would you be happy with?

Know this is a bit of a loaded question because you have to way in risk taken to get the return. But let's say it was lower on the risk poll, say a 3 or 4 max on a one to 10 , 10 being the worst and 1 being treasure bond ( in my opinion fairly risk) but generally agreed lowest risk.

So what is the least you would want to get?
What would be marginal rate or return?
What would knock your socks off?

Let me also say there is very, very little effort on your part, you don't have to manage rental properties, I would consider that on the higher side of the personal involvement spectrum.

If you can't answer the above, then why don't you answer this, what returns are you hopping to make this year. What would be the least you want? Marginal? Knock your socks off?

I know someone is going to say 100% return is the knock your socks off ect. But would really like to get and ideas what everyone is looking for, hoping for and getting. Everyone situations are different, there needs are different, investment styles are different and risk tolerance is different. I would welcome and thank you in advance for your personal thoughts and feedback.
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Old 01-28-2012, 12:10 AM   #2
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This is an intriguing question, and more difficult to answer than I had at first thought.

I guess that at a minimum, over the long term I'd want my yield to be equal to inflation.

A yield of 8% over inflation would knock my socks off and fly me to the moon. But then, I'm easily pleased.
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Old 01-28-2012, 12:19 AM   #3
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Before I answer, let me say that I place my risk level at about 6 to 7 on your scale of 1 to 10, based on my 71% AA in stocks with a bit of cyclical stocks and foreign equities.

That said, I would expect my total return to be around 4-5% above inflation. This means a return of 6-7%, given that inflation last year was 3.4%, and expected to be around 2.5% in 2012, I think.

If I get 10% or more, I would be very happy. Or maybe not, if it is just to make up for a prior bad year. Reversion to the mean, you know?
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Old 01-28-2012, 05:30 AM   #4
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9% pretax, in a 3% inflation environment.
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Old 01-28-2012, 06:51 AM   #5
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Least amount: equal to inflation
Marginal: 5.5% over inflation
Knock my socks off: 10% over inflation

Just hoping to retire and not run out of money before I and DW go.
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Old 01-28-2012, 07:06 AM   #6
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Least: equal to inflation
Goal: 2% over inflation
No socks: 4-5% over inflation

With my conservative AA, I'm not going to get any moon shot returns.
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Old 01-28-2012, 07:07 AM   #7
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No socks: 4-5% over inflation
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Old 01-28-2012, 07:09 AM   #8
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Old 01-28-2012, 08:37 AM   #9
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It would depend on whether you're still in the accumulation phase or already using the money, I would think.
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Old 01-28-2012, 08:50 AM   #10
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Real return of 4% with low year-to-year variations.
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Old 01-28-2012, 09:05 AM   #11
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Rock solid 6% guarenteed over inflation, and I could retire today.
Match inflation and I will be FI in less than 10 years (not sure how much less).
All the other options fall in between.
Hmm - maybe my time of aggressive AA is over.

Actually I wish this would have been a poll to see the forum average.
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Old 01-28-2012, 09:53 AM   #12
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My plan is built on a real return of 2%. Asking about expected returns or expected inflation alone aren't very useful IMHO. I hope real returns are better and history would suggest they will be.

Another reason I use a low number is sequence of returns, maybe not mentioned here often enough. Once you begin to draw from your nest egg, sequence of returns is a far greater factor than during the accumulation years. The exact same long term real return, with different sequences of returns, can end with wildly different end of plan outcomes. Food for thought...
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Old 01-28-2012, 10:33 AM   #13
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Originally Posted by Midpack
My plan is built on a real return of 2%. Asking about expected returns or expected inflation alone aren't very useful IMHO. I hope real returns are better and history would suggest they will be.

Another reason I use a low number is sequence of returns, maybe not mentioned here often enough. Once you begin to draw from your nest egg, sequence of returns is a far greater factor than during the accumulation years. The exact same long term real return, with different sequences of returns, can end with wildly different end of plan outcomes. Food for thought...
It follows that it is very important to avoid negative returns (and volatility) early in retirement. If you have saved enough, preservation of capital is more important than growth during retirement. If you are relying on growth to sustain your portfolio, you have a higher risk of ruin. Personally I would be happy with inflation rate +2-3%.
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Old 01-28-2012, 10:40 AM   #14
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At the most basic level, wouldn't a good situation be inflation rate + one's SWR? Then you're not eating into principal at all...
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Old 01-28-2012, 11:09 AM   #15
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Happy: 8%
OK: 6%
Joyous: over 10%
Bummer: less than 4%

All this assumes an inflation rate of no more than 2%, which I am not certain is realistic.
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Old 01-28-2012, 11:36 AM   #16
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I consider my risk profile at about a 7 ; 100% equities, but relatively conservative ones.

My targets / expectations focus on earnings / dividend growth and stability rather than market price, but since they are roughly correlated in the loooooong run -

I depend on 3% dividends growing with inflation, so at least 3% real return
I feel 3-5% real growth in those 3% dividends is most likely, so 6-8% real return
I am impressed by 12+% real returns
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Old 01-28-2012, 11:38 AM   #17
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Am in the accumulation phase, age 35, maybe 10-15 years from pulling the plug. Also, my risk is probably at about a 7.5 (maybe 25% foreign, maybe 20% in savings bonds/fixed income, and the rest in various other equities).

"minimal" = inflation (2.5%-3%)
assumed = 5%-6% nominal

For knocking my socks off, it is a bit of a loaded question - I know that returns will vary wildly from year to year for my portfolio, so if I managed a 15% return this year, I wouldn't be going crazy, because I'd know that the following year would likely be marginal (if not possibly negative) to average out.

My long-term socks-removing return would be 6% real + inflation (I have a decent slug of fixed income, so the equities would have to return pretty well in order to give me an overall average real return of 6%).
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Old 01-28-2012, 11:38 AM   #18
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Originally Posted by CyclingInvestor View Post
I consider my risk profile at about a 7 ; 100% equities, but relatively conservative ones.

My targets / expectations focus on earnings / dividend growth and stability rather than market price, but since they are roughly correlated in the loooooong run -

I depend on 3% dividends growing with inflation, so at least 3% real return
I feel 3-5% real growth in those 3% dividends is most likely, so 6-8% real return
I am impressed by 12+% real returns
My hero.
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Old 01-29-2012, 10:26 AM   #19
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minimum: 2.5% real return (after inflation)
ok: 3.5% real return
no socks: 4.5%
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Old 01-29-2012, 10:36 AM   #20
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Any real return at all would be appreciated
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