What rate of return do you expect over the long haul?

[summer2007]

I was reading an article in my local newspaper that was saying that Warren Buffet thinks that in the long run you can expect a 6.9% return. He thinks that the 8% that many pension plans are projecting is too high.

So I thought this would be a good poll question to see what return that others expect to get over say the next 20 to 40 years.

I made the poll broad to cover all answers.



Jim

 

[clifp]

Are these nominal returns or real (i.e. inflation adjusted) returns?

 

[summer2007]

I think they are nominal returns.

Jim

 

[samclem]

What asset type are we talking about? Our entire porfolios regardless of composition?

 

[2B]

I was reading an article in my local newspaper that was saying that Warren Buffet thinks that in the long run you can expect a 6.9% return. He thinks that the 8% that many pension plans are projecting is too high.

Let's see, Warren Buffet controls a real big insurance company (Berkshire) and he thinks investor returns will not be very high going forward. Maybe he could help all of us out and sell us annuities?

 

[OAG]

I voted 5% but really expect 5.7% or so (but can live well at 5%). I have received that average return for almost 30 years now. All fixed return no stock market.

 

[Dawg52]

I voted for 6%. Not sure I expect it, but hope.

 

[Robert the Red]

I voted 4% (over inflation). Nominal requires estimating a second quantity (inflation).

 

[CitricAcid]

I think long term, I expect 9% and 3% inflation, so I voted for 9% (5.825% real). Including dividends, international and my extremely high risk profile, I perhaps am shooting pretty high during my accumulation stage.

 

[ziggy29]

About 4.5% *real* return.

 

[Zathras]

I plan for 7% long term. I hope for more

 

[HFWR]

5-6% real...

 

[retire@40]

I use 7% in my long-term plan with 3% going to inflation and 4% real.

If I can get 10% for a couple of years in the beginning, then I may be able to do with a little less than 7% long-term.

 

[Notmuchlonger]

Negative. Man is entering another dark age.

 

[Marquette]

One billion percent

 

[MichaelB]

Negative. Man is entering another dark age.

Then invest in batteries and short solar

 

[Notmuchlonger]

Then invest in batteries and short solar

Sure joke about it. Let me tell you burlap is itchy..

 

[Marquette]

Sure joke about it. Let me tell you burlap is itchy..

We'll all be nudists then!

On the plus side, maybe more of us will be fit and good to look at then if there's food shortages.

On the other hand, overweight will be the new sexy again as it'll be a sign that someone is a good hunter or gatherer. I guess we're screwed either way.

 

[HFWR]

I guess we're screwed either way.

Every dark cloud...

 

[unclemick]

9.2% including inflation on my Vanguard calculator( I assume it's a historical type).

I'm more inclined to tip my hat to Buffett/Bogle's 7-8% range with their method of estimating.

Have been using 7% lately when running ORP.

heh heh heh - may change my mind. I tend to watch the SEC yield number more closely as I'm retired.

 

[Bikerdude]

I use 7% in my long-term plan with 3% going to inflation and 4% real.

If I can get 10% for a couple of years in the beginning, then I may be able to do with a little less than 7% long-term.

What s/he said.

 

[Gardnr]

The question, of course, is: The rate of return of what exactly?

- Your porfolio?
- The Dow?
- The S&P 500
- The U.S total stock market (i.e. Wilshire 5000)?
- A diversified portfolio allocated across various asset classes, including a bond portion?

Nominal or real, etc., etc.

With that said...
How, I wonder, did the great one come up with precisely 6.9%?!! I mean really, a guess at future returns is just that, and could hardly be narrowed down to the tenth of a percent. Even by the hallowed one from Omaha. Don't you think?

I think that given the growth potential of the global markets that we could likely see the same type of returns that the U.S. market has seen over the last 100 years or so. So if you weight them heavily enough then you just might get a good 10% in a globally allocated stock portfolio. That's my wild a$$ guess.

Check back in 20-40 years and we'll see if I'm right.

Am I betting on that in my personal portfolio? Naaaaahhh.

 

[JustCurious]

I think that given the growth potential of the global markets that we could likely see the same type of returns that the U.S. market has seen over the last 100 years or so. So if you weight them heavily enough then you just might get a good 10% in a globally allocated stock portfolio. That's my wild a$$ guess.

I think you're right. Remember that about 40% of the revenues of the companies in the S&P 500 comes from outside the U.S. So, if you're right, then the U.S. market will do just fine as well.

The people responding to this poll are obviously a conservative bunch. According to Vanguard, the average annual return of the U.S. market from 1926 to 2007 is 10.4%, and that 80 year period included the Great Depression, two world wars, the stagflation and oil crisis of the 1970's, the S&L crisis of the 1980's, Black Monday in 1987, the stock market bubble of the late 1990's, and the tech crash and bear market that followed in 2000 - 2002. The stock market has proven itself to be resilient over and over again, and I don't see why it won't continue to produce similar returns in the future, especially given the fact that a significant portion of U.S. companies' revenues now come from overseas.

 

[crazy connie]

Expect nothing and you will not be disappointed.

OR

Prepare for the worst and be happy when it doesn't happen.

 

[cute fuzzy bunny]

So it looks like the collective opinion is somewhere between 5 and 10% but most expected around 6-8%.

Glad we cleared that up