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Re: What is a good annualized return? What should I be shooting for? 11%, higher?
Old 04-28-2007, 08:33 AM   #21
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Re: What is a good annualized return? What should I be shooting for? 11%, higher?

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Originally Posted by Animorph
If you diversify like you should, your returns will be limited because all your money won't be in the highest returning asset. Whatever that may be. So don't set your standard so high that you are chasing returns.

I plan on 9% (6% real before inflation), but I try for something above 12% long term.

Dan
Yes we plan for 7% but aim for 12%. So we need 7% to achieve all of our goals and we consider any years above that as building for luxuries and legacies. Been getting 15% during this heyday but we expect to give some of that back in the next 18 months...80% equities
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Re: What is a good annualized return? What should I be shooting for? 11%, higher
Old 04-28-2007, 09:40 AM   #22
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Re: What is a good annualized return? What should I be shooting for? 11%, higher

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Originally Posted by samclem
lswswein and TexasProud---

As others point out, the idea of "shooting for" a particular return has some problems. There will be an average market return, and that can be had easily by investing in a few index funds at low cost and with some risk, but risk that is fairly low over a large number of years. It will probbaly not be anywhere near 11%, much closer to 4-6% over inflation. Anthing above that can only be gained only by "betting" on particular cap sizes, valuations (value vs growth), countries, industry sectors, industries, or individual stocks. I've made a minor bet in this regard myself--our portfolio is weighted toward small and value stocks. It is very difficult to quantify the risk you might assume in order to try to "bag" a 14% return. I second the recommendations to acquaint yourself thoroughly with the concept of "efficient frontier," William Bernstein's web page and book "The Intelligent Asset Allocator" are good places to start.
My point is 'shooting for a return' means nothing... I shoot for 100%, but don't get it...

You should be conservative in your calcualtions of how much you need and how much you need to save to get there... if you actually do get 11% (which had a decent chance of happening).. .then GREAT...

but if you calculate using 11% and only get 8%... you will fall far short of your goal...

SO, use 8 or 9 for you calculations and SHOOT for 11, or 18 or 25.. you have a great shot at meeting your goal and a probable shot at meeting it eary if you have some good years behind you...
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Re: What is a good annualized return? What should I be shooting for? 11%, higher?
Old 04-28-2007, 09:57 AM   #23
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Re: What is a good annualized return? What should I be shooting for? 11%, higher?

Like the 'trusty' old 25 times expenses rule of thumb for our nest egg - I suspect we all carry expectations(conciously or otherwise).

Lost in the mists of memory, I started my K&E engineering graph paper chart sometime after our 401k started circa late 76/1977 showing my ballpark 1.3 mil at age 63 in 2006 smack in the middle between my 8% and 10% return lines. Have no idea why I picked 8 and 10 - popular numbers at that time for 'the long term'?

Actually hit 1.1 mil inspite of a number of significant unplanned life events.

Once apon a time - It thought early retirement was age 63 and required working/maxing 401k and getting the full company match every year.

By all means - have a plan - but expect the possibility of making some adjustments in the stretch - ala Bear Bryants linebackers:

agile, mobile, and hostile.

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Re: What is a good annualized return? What should I be shooting for? 11%, higher?
Old 04-29-2007, 09:04 AM   #24
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Re: What is a good annualized return? What should I be shooting for? 11%, higher?

I don't think you should "shoot for" any return.

I would define one's risk tolerance (volatility you can sleep with, % equities, etc), and then invest to that tolerance in the lowest expense ratio / highest diversified way possible.

Then, "you gets what you gets".

To "define what return you need" upfront can get you in trouble. I know a guy who:
- Didn't have much saved
- Determined retirement assets needed
- Calculated that he needed "double digit returns" to get there
- Made a lot of stupid "Hail Mary pass" investment decisions
- Didn't sleep well
- Is still working

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Re: What is a good annualized return? What should I be shooting for? 11%, higher?
Old 04-29-2007, 09:37 AM   #25
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Re: What is a good annualized return? What should I be shooting for? 11%, higher?

Why be a piker and only shoot for 11%. I have a conservative, diversified portfolio and these are my recent performance numbers.

2004 -- 11.24%
2005 -- 11.93%
2006 -- 16.77%
2007 -- 24.35% YTD

Based on my trend, I'm targeting for 30% in 2008!

Nords had it right. Get yourself a diversified portfolio of low cost (mostly if not all) index funds, forget about them except for once a year and enjoy life. Many of us on this forum can tell you about the years we spent going for that extra return and how we underperformed the market as a result of our arrogance and pride.

I used to be a "chartist." That's about the most self-destructive behavior pattern an individual investor can have. I probably would have been better off with a wrap account at A. G. Edwards.
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Re: What is a good annualized return? What should I be shooting for? 11%, higher?
Old 04-29-2007, 10:02 AM   #26
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Re: What is a good annualized return? What should I be shooting for? 11%, higher?

Quote:
Originally Posted by 2B
2004 -- 11.24%
2005 -- 11.93%
2006 -- 16.77%
2007 -- 24.35% YTD

Based on my trend, I'm targeting for 30% in 2008!
Wouldn't that be 2007 or are you just pessimistic about the next 8 months?

And is it just on paper or have you banked any of it?

(My paper YTD is 35.8% but I am not spending any of it! At least not until it gets banked.)

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Re: What is a good annualized return? What should I be shooting for? 11%, higher?
Old 04-29-2007, 10:18 AM   #27
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Re: What is a good annualized return? What should I be shooting for? 11%, higher?

I'll wager that 2B's 24.35% YTD return is actually about 8.1% YTD and got multiplied by 3 to scale up to a full year's return. Since 2B made below average returns for 2004 to 2006, there is no reason to believe that 2007 will be any different for him.

A good annualized return is one that matches or beats the return of a similar diversified set of assets. One could use the returns shown in one of Paul Merriman's tables if you like for your asset allocatoin.
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Re: What is a good annualized return? What should I be shooting for? 11%, higher?
Old 04-29-2007, 10:35 AM   #28
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Re: What is a good annualized return? What should I be shooting for? 11%, higher?

Quote:
Originally Posted by LOL!
I'll wager that 2B's 24.35% YTD return is actually about 8.1% YTD and got multiplied by 3 to scale up to a full year's return. Since 2B made below average returns for 2004 to 2006, there is no reason to believe that 2007 will be any different for him.
The return is what I got when I put "Year to Date" into the Quicken report. That's the return I'd get if the next 8 months are equivalent to the first 4. Dividing by 3 is probably a fair estimate of the actual change if my account becomes frozen until December 31.

Below average return?

It all depends on what index you measure against. Mine underperforms its consolidated index by the fund fees I pay. I did beat the S&P500 in all years posted. That's due to my nominal 25% foreign and 15% small cap allocations. Returns were lowered by the fixed income component.

Here are the S&P returns for the same periods. There are a whole lot of high priced fund managers that would love to put my numbers out in their sales literature.

2004 9.00
2005 3.01
2006 12.80

Bottom line for all of us is that we must find an asset allocation we are comfortable with.
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Re: What is a good annualized return? What should I be shooting for? 11%, higher?
Old 04-29-2007, 11:23 AM   #29
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Re: What is a good annualized return? What should I be shooting for? 11%, higher?

Quote:
Originally Posted by 2B
Here are the S&P returns for the same periods. There are a whole lot of high priced fund managers that would love to put my numbers out in their sales literature.

2004 9.00
2005 3.01
2006 12.80
2B, your SP500 returns are wrong. You are making the common mistake of simply looking at the SP500 index values and ignoring dividends. Here are the CORRECT returns of the SP500 for that time period as measured by Vanguard's SP500 index fund:

2004 10.74
2005 4.77
2006 15.64

By the way, I was exchanging emails with a broker (assistant VP) from Morgan Stanley recently, and he made the very same mistake you did.
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Re: What is a good annualized return? What should I be shooting for? 11%, higher?
Old 04-29-2007, 11:46 AM   #30
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Re: What is a good annualized return? What should I be shooting for? 11%, higher?

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2B, your SP500 returns are wrong. You are making the common mistake of simply looking at the SP500 index values and ignoring dividends. Here are the CORRECT returns of the SP500 for that time period as measured by Vanguard's SP500 index fund:

2004 10.74
2005 4.77
2006 15.64

By the way, I was exchanging emails with a broker (assistant VP) from Morgan Stanley recently, and he made the very same mistake you did.
I just did a cut and paste off of a site that listed the S&P 500 return. The numbers just serve as a "rangefinder" but thanks for the improvement in accuracy.

I've been evolving my index allocations since the late 1990s. I started slowly moving from individual stocks then and moving money into SPY and IWD. Eventually, I discovered the benefits of diversification into foreign and small caps but didn't get fully on board until 2006. I can't bring myself to buy REITs at their current valuations so I guess I must confess to still being a market timer.

I was layed off in 2002 which triggered a "sell most everything" reaction to be ultra conservative. I slowly started increasing my stock allocation in 2003. Right now I'm about 25% cash/fixed income which I believe is a tad too low. I think I should move towards 40%. "Rebalance Day" comes officially in 4 months. I need to decide where I want to be by then.
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Re: What is a good annualized return? What should I be shooting for? 11%, higher?
Old 04-29-2007, 11:51 AM   #31
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Re: What is a good annualized return? What should I be shooting for? 11%, higher?

Quote:
Originally Posted by 2B
I just did a cut and paste off of a site that listed the S&P 500 return. The numbers just serve as a "rangefinder" but thanks for the improvement in accuracy.
That's fine if you think inaccurate numbers are "rangefinders", but I wouldn't rely on that site anymore.
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Re: What is a good annualized return? What should I be shooting for? 11%, higher?
Old 04-29-2007, 02:08 PM   #32
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Re: What is a good annualized return? What should I be shooting for? 11%, higher?

Quote:
Originally Posted by LOL!
One could use the returns shown in one of Paul Merriman's tables if you like for your asset allocatoin.
Did Merriman give any detail about the equity or bond used in this table? What funds is he referring to?
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Re: What is a good annualized return? What should I be shooting for? 11%, higher?
Old 04-29-2007, 02:57 PM   #33
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Re: What is a good annualized return? What should I be shooting for? 11%, higher?

If I can get a real rate of return of over 5%, I am one happy camper. Any more, and I'm one a real happy camper.
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Re: What is a good annualized return? What should I be shooting for? 11%, higher?
Old 04-29-2007, 02:59 PM   #34
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Re: What is a good annualized return? What should I be shooting for? 11%, higher?

Quote:
Originally Posted by Sam
Did Merriman give any detail about the equity or bond used in this table? What funds is he referring to?
Of course, but you have to read the articles on the web site.
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