What annual return would you be happy with?

[Wrirya]

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.

 

[W2R]

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.

 

[NW-Bound]

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?

 

[justplainbll]

9% pretax, in a 3% inflation environment.

 

[DFA]

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.

 

[Dawg52]

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.

 

[REWahoo]

No socks: 4-5% over inflation

Dawg52 - AKA "The Barefoot Investor"

 

[Dawg52]

Dawg52 - AKA "The Barefoot Investor"

With a can of med's in one hand.

 

[Bestwifeever]

It would depend on whether you're still in the accumulation phase or already using the money, I would think.

 

[Spanky]

Real return of 4% with low year-to-year variations.

 

[Grainiac]

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.

 

[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...

 

[Meadbh]

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%.

 

[arebelspy]

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...

 

[Chuckanut]

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.

 

[CyclingInvestor]

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

 

[MooreBonds]

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%).

 

[Dawg52]

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.

 

[sunsnow]

risk level: 4
minimum: 2.5% real return (after inflation)
ok: 3.5% real return
no socks: 4.5%

 

[foxfirev5]

Any real return at all would be appreciated

 

[Telly]

A real return of 3% will work for me. Probably could make it with less long-term, once on SS, but that would begin eating away the safety margin.

 

[Huston55]

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...

Yep. This is where I am as well.
Minimum would be ~2% lower.
Knock my socks off would be >=4% higher, given AA.

 

[justplainbll]

After taxes some are lucky if the financial income keeps pace with inflation.
E.G. my folks bought about $2,500 of E-Bonds in the 1960's. At final maturity, when they were redeemed, the after tax proceeds were enough to buy an automobile similar to what could have been purchased for $2,500 in the 1960s.

 

[davemartin88]

We're about a 5 on the 1-10 scale. We are finding that as we adjust to ER along with our move to a less expensive area, we're spending a bit less than planned on an annual basis. DW is still working and we're using her income to finish the new place. With this in mind, investments keeping pace with inflation is good news. If we can gain a few percent, then that would be wonderful.

It's good to know that we can be satisfied with just keeping pace- for those still in the serious accumulation phase, the pressure must really be tough given the last few years experience.

 

[WB52]

+1