How could expected returns be anything other than lower than before if price increases are outpacing value increases? No matter what we are told, there is such a thing as an economic value to a business enterprise. Though this value can vary with enterprise and with time, it does not just add 10% pa to wherever you happen to start.I think he's been saying this for quite awhile now. Not sure why an audience of Bogleheads would be surprised. I bet not many on these boards will be.....
Bogleheads attending his annual conference in October were taken aback when Bogle predicted that stock and bonds returns would be significantly lower than historic benchmarks returns. Over the next decade, stocks will return an average of 4% annually while bonds will earn 3.5% annually, he forecast. Both predictions are significantly lower than historical returns since 1974 of 11.7% for stocks and 8% for bonds.
Absolutely true. But ...This is an argument against whole-market indexing. If Mister Market as a whole is going to return only 4% annually over the next decade, surely certain sectors will do better.
Surely you are right...now if we just knew which ones, and what timing....or had a financial advisor or broker who consistently beat the market.This is an argument against whole-market indexing. If Mister Market as a whole is going to return only 4% annually over the next decade, surely certain sectors will do better.
Not getting political, but I think Washington has a lot to do with this prediction. There is fear even though we are economically solid.
IF I get a 4% return on equities and a 3.5% return on bonds WITH 2% inflation. I would be very happy. Inflation is the silent killer.
Washington has nothing to do with Bogle's forecast - it is simple math. The 10 year yield for bonds, current dividend yield plus earnings growth minus P/E contraction for stocks.
The last two elements are Bogle's forecasts, but his numbers are within historical norms.
Well he is predicting these returns just for one decade, not a 30-40 yr period. Are the stock returns drastically different from what we saw from 2000-2010?
Are there any historical patterns in Firecalc which could be mapped out to this type of prediction for survival results?
Not us, IMO. That is why the majority of our fixed income tranche is in TIPS.... I see people saying hyperinflation couldn't happen here, but five years of 20% inflation would be enough to send me to Home Depot looking for work.
This site works well for plugging in specific years:
https://goo.gl/CsZjKt (from www.portfoliovisualizer.com - the short link includes some data entries)
-ERD50
+2. My plan is based on 0-2% real returns. If we get 2% real or more, we’ll have it made.IF I get a 4% return on equities and a 3.5% return on bonds WITH 2% inflation. I would be very happy. Inflation is the silent killer.
Not us, IMO. That is why the majority of our fixed income tranche is in TIPS.
We expect that in high inflation TIPS will do quite well, as Treasury will stop issuing them and panicked buyers will bid prices up well beyond what normal competitive YTM numbers would be.
We consider the small yield penalty we pay now to be an insurance premium, not an investment loss.
My plan is based on 0-2% real returns. If we get 2% real, we’ll have it made.
So, the 4% SWR is dead.... I have never seen any member of any Investment forum using this as an actual Withdrawal Tool.
This looks like a pretty good case for VPW to me.
So, the 4% SWR is dead.... I have never seen any member of any Investment forum using this as an actual Withdrawal Tool.
This looks like a pretty good case for VPW to me.
Agree, but the ancillary question is can folks still use the 4% rule or actually the reciprocal 25x expenses guideline in order to see if they are in good shape to retire?