Join Early Retirement Today
View Poll Results: What will be the stock market growth in the next 7 - 10 years?
-5% - 0% - Doomsday, we will be hit by a Great Depression. God help us. 4 5.56%
0% - 2%+ - We’ll be hit by a mild/regular recession and then market can recover but is flat 7 9.72%
3% - 5%+ - Low Growth – the market ain’t like it use to be, but still growing just above inflation 32 44.44%
6% - 8%+ - While I'm conservative in my plans, it will be like the Average growth for the past 80 years 25 34.72%
9% - 14%+ - The Technology Revolution, just like the Industrial Revolution, will take us higher 4 5.56%
Voters: 72. You may not vote on this poll

Reply
 
Thread Tools Search this Thread Display Modes
Old 04-23-2016, 11:47 AM   #21
Recycles dryer sheets
prototype's Avatar
 
Join Date: Mar 2011
Posts: 173
I have no idea what it will be or have any statistics/analysis to post. So I went with I the 3-5 percent. I'm OK with that. More is always better of course :-).

If a big correction/recession hits in the next 10 years, I will just make appropriate budget/lifestyle adjustments for a while (like switching from expensive K-Cups to cheap instant coffee, cancel my Netflix subscription, etc. LOL) and reallocate accordingly.
__________________

__________________
prototype is online now   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 04-23-2016, 11:50 AM   #22
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Gone4Good's Avatar
 
Join Date: Sep 2005
Posts: 5,381
Quote:
Originally Posted by eta2020 View Post
You need to be an optimist in order to invest. I am looking at 100 year chart of S&P and it looks mighty fine, but only for people who can handle down years.
I'm not so optimistic to think I'm going to have to worry about 100 year returns.
__________________

__________________
Retired early, traveling perpetually.
Gone4Good is offline   Reply With Quote
Old 04-23-2016, 12:33 PM   #23
gone traveling
 
Join Date: Sep 2013
Posts: 1,248
Quote:
Originally Posted by Gone4Good View Post
I'm not so optimistic to think I'm going to have to worry about 100 year returns.
S&P 500 Return Calculator, with Dividend Reinvestment - Don't Quit Your Day Job...

But I assume that having retired at 38 you will likely live another 20 years.
Going back to 1900 I can not find any 20 years with negative inflation adjusted returns.

2% CD after inflation and taxes is pretty much 0% return if you are lucky. If equities earned only
2% they would still be better deal because they have favorable tax status.

Maybe this time it is different
__________________
eta2020 is offline   Reply With Quote
Old 04-23-2016, 12:54 PM   #24
Thinks s/he gets paid by the post
nash031's Avatar
 
Join Date: Jun 2013
Location: Coronado
Posts: 1,486
Quote:
Originally Posted by Gone4Good View Post
I think there's a lot of confusion between timing the market and forecasting long-term market returns. The former is near impossible. The latter is not.

That doesn't help me time the market. Interest rates could soar or they could fall between now and maturity. But at maturity, I know exactly what I'll get . . . 1.89% annually for 10 years.

Stock returns have more variability than treasury strips. But just like bonds, when you buy stocks at earnings yields that are lower than average you should expect lower than average returns. No market timing required.
I understand that, but I also understand that while you can probably predict "below average", you can't pinpoint it, heck I'd say you won't be within 1% +/-. So, potato po-tah-to... I'm in violent agreement as I've also forecast "below average" returns for my portfolio planning. Your definition of "below average" happens to be different than mine by 4%.

As I've now said three times: time is on my side, so if your number is closer to correct than mine, it makes no nevermind.

I should also note that I "predict" portfolio earnings, not the S&P, so that makes some difference considering I have 30% of our equity position in international stock funds as well. And obviously that includes dividends reinvested when I say "6%". *shrug*
__________________
"So we beat to our own drummer in the sun;
We ask for nobody's permission to run.
I just wanna live in a world like that;
Now I'm gonna live in a world like that!" - World Like That, O.A.R.
nash031 is offline   Reply With Quote
Old 04-23-2016, 12:54 PM   #25
Thinks s/he gets paid by the post
Fedup's Avatar
 
Join Date: Mar 2014
Location: Southern Cal
Posts: 2,930
I say 2%. I was in mostly CDs in 2007, lots of cash in 2008-2009, but did get back in 2009 for my husband, and 2010 for my account. I slept well and so was my husband.
Now I don't remember what happened to my 401k money in 1987, but I did buy a put the Friday before the market dropped on Monday 1987. Yes, I'm a "dirty little market timer", LOL.
No sage advice there except I inherit a little gambling trait in my nature. Maybe I'll learn to invest properly eventually.


Sent from my iPad using Early Retirement Forum
__________________
When I post IIRC, that means going by memory. Google is your friend for facts. Stop being a lazy bum, I can't do all the googling for you. I'm lazy too. LOL
Fedup is offline   Reply With Quote
Old 04-23-2016, 01:15 PM   #26
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Gone4Good's Avatar
 
Join Date: Sep 2005
Posts: 5,381
Quote:
Originally Posted by eta2020 View Post
S&P 500 Return Calculator, with Dividend Reinvestment - Don't Quit Your Day Job...

But I assume that having retired at 38 you will likely live another 20 years.
Going back to 1900 I can not find any 20 years with negative inflation adjusted returns.

2% CD after inflation and taxes is pretty much 0% return if you are lucky. If equities earned only
2% they would still be better deal because they have favorable tax status.

Maybe this time it is different
Well, I certainly expect to live longer than 20 years. And I certainly don't expect to own a lot of CDs during most of that time. More than that, I hope I don't need to.

But right now CDs pay above market returns and have an incredibly valuable interest rate put option that I get for almost nothing. I know many folks here are wedded to a set and forget asset allocation (and that's fine) but in the rare instances when I can buy a security that guarantees me above market returns for less risk I like to jump on that.

I don't need to forecast 20-year negative real returns in equities to know that CDs are a good deal today. If in 2 years or even 2 days the market is offering up better options, I'll buy those instead.

It's also probably worth knowing that I'm not managing my finances to earn a hypothetical market return. I'm managing it to earn my withdrawal rate.

And when asset prices rise, my WR falls. Now after 7 years of good market returns, I don't need the same investment performance going forward as I did when I retired. So I need less risk.

It's also true that those 7 years of good market returns have lowered expected future returns on risky assets. So risk today yields less than when I retired.

So here's the punchline: if I need less risk than when I first retired, and if risk earns less today than it did then, what's the argument for wearing the same level of investment risk (or maintaining the same asset allocation) now as I had then?

I can't think of one.
__________________
Retired early, traveling perpetually.
Gone4Good is offline   Reply With Quote
Old 04-23-2016, 02:59 PM   #27
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
mickeyd's Avatar
 
Join Date: Apr 2004
Location: South Texas~29N/98W
Posts: 5,881
The family crystal ball was just sent out for annual recalibration. I will have to respond at a later date after it is returned.
__________________
Part-Owner of Texas

Outside of a dog, a book is man's best friend. Inside of a dog, it's too dark to read. Groucho Marx

In dire need of: faster horses, younger woman, older whiskey, more money.
mickeyd is offline   Reply With Quote
Old 04-23-2016, 03:52 PM   #28
Thinks s/he gets paid by the post
nash031's Avatar
 
Join Date: Jun 2013
Location: Coronado
Posts: 1,486
Quote:
Originally Posted by Gone4Good View Post
Well, I certainly expect to live longer than 20 years. And I certainly don't expect to own a lot of CDs during most of that time. More than that, I hope I don't need to.

But right now CDs pay above market returns and have an incredibly valuable interest rate put option that I get for almost nothing. I know many folks here are wedded to a set and forget asset allocation (and that's fine) but in the rare instances when I can buy a security that guarantees me above market returns for less risk I like to jump on that.

I don't need to forecast 20-year negative real returns in equities to know that CDs are a good deal today. If in 2 years or even 2 days the market is offering up better options, I'll buy those instead.

It's also probably worth knowing that I'm not managing my finances to earn a hypothetical market return. I'm managing it to earn my withdrawal rate.

And when asset prices rise, my WR falls. Now after 7 years of good market returns, I don't need the same investment performance going forward as I did when I retired. So I need less risk.

It's also true that those 7 years of good market returns have lowered expected future returns on risky assets. So risk today yields less than when I retired.

So here's the punchline: if I need less risk than when I first retired, and if risk earns less today than it did then, what's the argument for wearing the same level of investment risk (or maintaining the same asset allocation) now as I had then?

I can't think of one.
There isn't a one. So, I think you highlight the major difference between you and I as it pertains to our outlook. You are looking to reduce risk, and safely earn your WR. Thus, taking a less optimistic view of future returns is likely smart; you've won the game and have no real need to keep playing it if you don't want to. Thus, if you project less than 2% nominal, you have better options to earn that return for far less risk.

Me? If I'm projecting a 6% nominal in my accumulation phase or if I'm projecting 2%, it doesn't really matter. I am willing and able to take on more risk (within reason) and aim for 6% nominal, but if I end up with 10% or 1.89% or -5%, I can adjust the timeline and move forward from there.

Sure, I could project 1.89% and move assets around, but that's against my core strategy of minimizing costs and taxes (the things I can really control) while seeking a reasonable return.
__________________
"So we beat to our own drummer in the sun;
We ask for nobody's permission to run.
I just wanna live in a world like that;
Now I'm gonna live in a world like that!" - World Like That, O.A.R.
nash031 is offline   Reply With Quote
Old 04-23-2016, 04:41 PM   #29
gone traveling
 
Join Date: Sep 2013
Posts: 1,248
Quote:
Originally Posted by nash031 View Post
There isn't a one. So, I think you highlight the major difference between you and I as it pertains to our outlook. You are looking to reduce risk, and safely earn your WR. Thus, taking a less optimistic view of future returns is likely smart; you've won the game and have no real need to keep playing it if you don't want to. Thus, if you project less than 2% nominal, you have better options to earn that return for far less risk.

Me? If I'm projecting a 6% nominal in my accumulation phase or if I'm projecting 2%, it doesn't really matter. I am willing and able to take on more risk (within reason) and aim for 6% nominal, but if I end up with 10% or 1.89% or -5%, I can adjust the timeline and move forward from there.

Sure, I could project 1.89% and move assets around, but that's against my core strategy of minimizing costs and taxes (the things I can really control) while seeking a reasonable return.
Today people who hold cash equivalents feel comfortable. They shouldn't. They have opted for a terrible long-term asset, one that pays virtually nothing and is certain to depreciate in value.

Warren Buffett Oct 16, 2008

PS I am sure we have people here who are way better then Buffet getting in and out of equities
__________________
eta2020 is offline   Reply With Quote
Survey - Predict Stock Market Growth Average for next 7 - 10 years
Old 04-23-2016, 06:23 PM   #30
Thinks s/he gets paid by the post
Fedup's Avatar
 
Join Date: Mar 2014
Location: Southern Cal
Posts: 2,930
Survey - Predict Stock Market Growth Average for next 7 - 10 years

But Warren Buffet can lose 99% of his wealth and still be ok, for most of us not. That's why people are nervous. I know a young guy about 50, he sold out in 2014. His sister was down 11% from the peak and will sell into cash the minute she recovers the lost, that's what she told me a few weeks ago.


Sent from my iPad using Early Retirement Forum
__________________
When I post IIRC, that means going by memory. Google is your friend for facts. Stop being a lazy bum, I can't do all the googling for you. I'm lazy too. LOL
Fedup is offline   Reply With Quote
Old 04-23-2016, 07:36 PM   #31
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Nov 2007
Posts: 7,527
For projection purposes, I've been using 4-5% real returns for 10+ year periods, so I voted in the 6-8% nominal range but expect closer to 6% rather than 8% unless inflation goes to 3%+.

Along the lines of Gone4Good's analysis. In rough round terms, 2% dividends, 2% earnings growth, 2% inflation = 6% nominal return. In my back of the envelope model I don't change the CAPE or PE ratio.
__________________
Retired in 2013 at age 33. Keeping busy reading, blogging, relaxing, gaming, and enjoying the outdoors with my wife and 3 kids (5, 11, and 12).
FUEGO is offline   Reply With Quote
Old 04-23-2016, 07:53 PM   #32
Thinks s/he gets paid by the post
 
Join Date: Feb 2014
Posts: 1,050
I don't think post 2008 that any of the "normal" rules apply. I think stocks and bonds are not cheap right now. That doesn't mean they can't go higher.
__________________
jim584672 is offline   Reply With Quote
Old 04-23-2016, 08:18 PM   #33
Thinks s/he gets paid by the post
 
Join Date: Sep 2006
Posts: 1,318
Quote:
Originally Posted by Fedup View Post
I know a young guy about 50, he sold out in 2014. His sister was down 11% from the peak and will sell into cash the minute she recovers the lost, that's what she told me a few weeks ago.
And when will they go back in? Do they know? Or will they stay in cash for the duration?

The S&P lost 50% of its value during the great recession but the average return over the 7 years that followed is 15%. I know some people who panicked and sold out and are still waiting to get back in.

In most cases market timing does not work. Establishing an asset allocation based on risk tolerance with some tweaks if needed is a better approach in my opinion.
__________________
Corporateburnout is offline   Reply With Quote
Survey - Predict Stock Market Growth Average for next 7 - 10 years
Old 04-23-2016, 08:49 PM   #34
Thinks s/he gets paid by the post
Fedup's Avatar
 
Join Date: Mar 2014
Location: Southern Cal
Posts: 2,930
Survey - Predict Stock Market Growth Average for next 7 - 10 years

Quote:
Originally Posted by Corporateburnout View Post
And when will they go back in? Do they know? Or will they stay in cash for the duration?

The S&P lost 50% of its value during the great recession but the average return over the 7 years that followed is 15%. I know some people who panicked and sold out and are still waiting to get back in.

In most cases market timing does not work. Establishing an asset allocation based on risk tolerance with some tweaks if needed is a better approach in my opinion.

I don't know. I know when I left he was still in cash Dec 15, I hope he got in Feb.



Sent from my iPad using Early Retirement Forum
__________________
When I post IIRC, that means going by memory. Google is your friend for facts. Stop being a lazy bum, I can't do all the googling for you. I'm lazy too. LOL
Fedup is offline   Reply With Quote
Old 04-24-2016, 06:11 AM   #35
gone traveling
 
Join Date: Sep 2013
Posts: 1,248
Quote:
Originally Posted by Fedup View Post
But Warren Buffet can lose 99% of his wealth and still be ok, for most of us not. That's why people are nervous. I know a young guy about 50, he sold out in 2014. His sister was down 11% from the peak and will sell into cash the minute she recovers the lost, that's what she told me a few weeks ago.


Sent from my iPad using Early Retirement Forum
That is why one should have few years of spending sitting in cash.
__________________
eta2020 is offline   Reply With Quote
Old 04-24-2016, 06:30 AM   #36
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
pb4uski's Avatar
 
Join Date: Nov 2010
Location: Vermont & Sarasota, FL
Posts: 16,428
Quote:
Originally Posted by Fedup View Post
But Warren Buffet can lose 99% of his wealth and still be ok, for most of us not. That's why people are nervous. I know a young guy about 50, he sold out in 2014. His sister was down 11% from the peak and will sell into cash the minute she recovers the lost, that's what she told me a few weeks ago. ...
I wonder what the sister is in since the index is only down about 5.2% from the peak and that doesn't include dividends.... with dividends I'm guessing it would be down only 3% or so. My diversified portfolio is only down about 1.5% from the peak so 11% is probably a misconception on her part or bad stock picking.

Besides the peak was less than a year ago. No risk... no reward.
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.
pb4uski is online now   Reply With Quote
Old 04-24-2016, 06:39 AM   #37
gone traveling
 
Join Date: Sep 2013
Posts: 1,248
Quote:
Originally Posted by pb4uski View Post
I wonder what the sister is in since the index is only down about 5.2% from the peak and that doesn't include dividends.... with dividends I'm guessing it would be down only 3% or so. My diversified portfolio is only down about 1.5% from the peak so 11% is probably a misconception on her part or bad stock picking.

Besides the peak was less than a year ago. No risk... no reward.
S&P 500 Already Hit a Record–If You Count Dividends - MoneyBeat - WSJ

I do not know if this is really true, but S&P is already in record territory if you include dividends. (which are low taxed)
__________________
eta2020 is offline   Reply With Quote
Old 04-24-2016, 07:20 AM   #38
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Gone4Good's Avatar
 
Join Date: Sep 2005
Posts: 5,381
Quote:
Originally Posted by eta2020 View Post
Today people who hold cash equivalents feel comfortable. They shouldn't. They have opted for a terrible long-term asset, one that pays virtually nothing and is certain to depreciate in value.

Warren Buffett Oct 16, 2008

PS I am sure we have people here who are way better then Buffet getting in and out of equities
The fallacies here are three fold: 1) That people who hold cash today will hold cash forever; 2) That after a long bull market that has returned in excess of 200% from it's through that the return distribution of equities going forward is still somehow a random walk around it's historic mean and 3) that the people who bought equities in March 2009 (like me) still somehow need maximum equity risk even after earning ~17% compound annualized returns on equities for the last seven years.

So here's an analogy: you've won a ton of money at the roulette wheel when the manager comes and replaces the existing wheel with one that decreases your odds and potential payouts going forward. Do you keep playing on that wheel because "hey, nobody can predict the future" or do you cash in your chips and look for better odds somewhere or some-when else?
__________________
Retired early, traveling perpetually.
Gone4Good is offline   Reply With Quote
Old 04-24-2016, 07:24 AM   #39
Recycles dryer sheets
 
Join Date: Oct 2011
Posts: 405
Quote:
Originally Posted by FUEGO View Post
For projection purposes, I've been using 4-5% real returns for 10+ year periods, so I voted in the 6-8% nominal range but expect closer to 6% rather than 8% unless inflation goes to 3%+.

Along the lines of Gone4Good's analysis. In rough round terms, 2% dividends, 2% earnings growth, 2% inflation = 6% nominal return. In my back of the envelope model I don't change the CAPE or PE ratio.
Inflation is really key here. Otherwise portfolio returns are like knowing how much gas is in the tank but not knowing your MPG.

I've got a portfolio that is 45 stock, 25 bonds and 30 that is in a high interest bearing NQDC plan. (The interest rate on the NQDC plan is higher than the long term returns for stocks and the company has a pristine balance sheet, which is why I'm so far into it. If the company suddenly turned into Enron, be on the lookout for a suicide post...)

When I leave megacorp the NQDC plan will earn prime+1 until each tranche matures over the 7 years following my departure. As the money comes out of the NQDC, I will blend towards a 60/40 AA.

I'm assuming I can earn a 3% real RoR over the next 15 years...which is in the end all that matters.

Curious if people think that's reasonable.
__________________
Luck is when Preparation meets Opportunity.
Closet_Gamer is offline   Reply With Quote
Old 04-24-2016, 07:53 AM   #40
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Gone4Good's Avatar
 
Join Date: Sep 2005
Posts: 5,381
Regarding the fallacy that "no one can predict future market returns" we'll go back in time and recall this thread I started on March 7, 2009 a day or two from the ultimate market bottom . . .

Quote:
Originally Posted by Gone4Good View Post
As measured by P/E-10 (currently 11.8x), stocks have traded this cheap or cheaper during 10 different periods over the past 100 years. Someone who bought the S&P 500 at the beginning of any of those 10 periods always earned positive returns over the next ten years (with reinvested dividends). Average returns were 11%. The lowest return was 5.8%, earned from October 1931 to September 1941.

So the worst historical 10-year return for stocks bought at current valuations of 5.8% beats money market funds yielding 1%, 10-year treasuries yielding 2.87% and very nearly beats intermediate investment grade corporate bonds yielding 6.11% (for VFICX). Meanwhile median returns for stocks over these 10 periods were close to 10% with the best 10-yr return reaching 18.6%.

SPX returns over the 10 year period immediately following a P/E-10 valuation of 11.8x:

Oct 1946 - Sep 1956 . . . . 18.61%
Sep 1953 - Aug 1963 . . . . 16.04%
Nov 1941 - Oct 1951 . . . . 15.97%
Jul 1974 - Jun 1984 . . . . . 11.97%
Dec 1916 - Nov 1926 . . . . . 9.77%
Apr 1938 - Mar 1948 . . . . . 9.52%
Aug 1934 - Jul 1944 . . . . . . 9.41%
Oct 1907 - Sep 1917 . . . . . 7.54%
Jun 1913 - May 1923 . . . . . 7.17%
Oct 1931 - Sep 1941 . . . . . 5.78%

Many of us have been planning on below average stock returns because of high valuations. Well, those below average returns have already been realized and are now in the rear-view mirror. It's time to start raising your expectations for future returns.
The analysis is no different today. It's the conclusion that's different.
__________________

__________________
Retired early, traveling perpetually.
Gone4Good is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Emerging and Developing GDP Growth exceeds GDP Growth in Advanced Economies bUU Other topics 3 06-28-2013 12:42 PM
Predict Market Response to Obama on Feb 24, 2009 ERD50 FIRE Related Public Policy 56 02-27-2009 02:12 PM
IRA Max. Growth Next 5 Years flpanhandle FIRE and Money 6 06-15-2007 08:52 PM
more than average savings- average spending shorttimer Young Dreamers 23 11-04-2006 05:32 PM

 

 
All times are GMT -6. The time now is 04:42 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.