I have a number of friends who have recently retired and use the same financial advisor. While playing golf the other day I was inquiring how this guy does and one person told me, his financial advisor has stated that he thinks he can average approx. 12% return a year over a five year period with a diversified portfolio.
IMHO, his financial adviser is telling the truth and he actually does think that he can average 12% (nominal) per year.
To explain this, I won't even talk about the difference between an average return and an annualized return. [An average return is bigger than the annualized return unless
the return is exactly the same every year.] I don't think that the financial adviser is even aware of that point.
I think that the financial adviser has been taught by people who have limited their historical perspective to the recent past, perhaps from 1980 until today. Some investment classes such as today's REITS (not the disastrous first generation of REITS) only go back twenty years or so. If so, his entire historical perspective has been caught up in a massive bull market with a spectacular bubble that has not been deflated fully even today.
That is my impression. A financial adviser who mentions a 12% (nominal) return in today's markets is horribly misinformed.