Author Topic: Bogle's 4% Prediction for the next decade?  (Read 1204 times)

andysandp

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Bogle's 4% Prediction for the next decade?
« on: December 05, 2017, 03:09:08 PM »
Any thoughts about Bogle's prediction that the market will only give 4% for the next decade instead of the average of 10%?

https://www.cnbc.com/2017/11/20/jack-bogles-5-bold-investment-predictions-for-2018-and-beyond.html

2Birds1Stone

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Re: Bogle's 4% Prediction for the next decade?
« Reply #1 on: December 05, 2017, 03:51:18 PM »
Just like you and I, he has no crystal ball.
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kayvent

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Re: Bogle's 4% Prediction for the next decade?
« Reply #2 on: December 05, 2017, 03:59:07 PM »
If you look at historic rates of return, four percent would be considered high. Pardoning the last 200 years, growth tended to be incremental. If inflation isn't high, that isn't a horrible return rate.

(While we're discussing predictions, I'm calling it now: Tesla to zero within ten years.)
« Last Edit: December 05, 2017, 04:03:25 PM by kayvent »

PizzaSteve

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Re: Bogle's 4% Prediction for the next decade?
« Reply #3 on: December 05, 2017, 04:08:23 PM »
A steady 4% is fine with me.  It seems a reasonable assumption.  As long as we avoid a crash, with continued low interest rates 4% is actually quite fine.
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andysandp

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Re: Bogle's 4% Prediction for the next decade?
« Reply #4 on: December 05, 2017, 05:12:37 PM »
If you look at historic rates of return, four percent would be considered high. Pardoning the last 200 years, growth tended to be incremental. If inflation isn't high, that isn't a horrible return rate.

(While we're discussing predictions, I'm calling it now: Tesla to zero within ten years.)

I thought historic rate with Dividends is 8-10%?  He's saying 4% with Dividends.

Bogle said, "Stocks will return about 4% a year  for the next decade or so rather than the 10% average annual returns of recent decades."
« Last Edit: December 05, 2017, 05:17:40 PM by andysandp »

maizeman

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Re: Bogle's 4% Prediction for the next decade?
« Reply #5 on: December 05, 2017, 05:29:46 PM »
If you look at historic rates of return, four percent would be considered high. Pardoning the last 200 years, growth tended to be incremental. If inflation isn't high, that isn't a horrible return rate.

(While we're discussing predictions, I'm calling it now: Tesla to zero within ten years.)

I thought historic rate with Dividends is 8-10%?  He's saying 4% with Dividends.

Bogle said, "Stocks will return about 4% a year  for the next decade or so rather than the 10% average annual returns of recent decades."

Your 8-10% (actually call it 6.8% before inflation, 9.1% including the effects of inflation) is almost certainly based on data from 1871-Present which is the era from which we have good data.

Kayvent is talking about growth excluding the last two hundred years or so (so from the dawn of time to 1817). It's much harder to get good data on investment returns looking so far back in time. If you believe Picketty (the guy who wrote "Capital in the 21st Century"), returns on capital were on the order of 4.5-5% from around the year 0 to around the 1700s.
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kayvent

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Re: Bogle's 4% Prediction for the next decade?
« Reply #6 on: December 05, 2017, 06:29:04 PM »
If you look at historic rates of return, four percent would be considered high. Pardoning the last 200 years, growth tended to be incremental. If inflation isn't high, that isn't a horrible return rate.

(While we're discussing predictions, I'm calling it now: Tesla to zero within ten years.)

I thought historic rate with Dividends is 8-10%?  He's saying 4% with Dividends.

Bogle said, "Stocks will return about 4% a year  for the next decade or so rather than the 10% average annual returns of recent decades."

Compound growth is a modern phenomenon that economists still struggle to explain. Historically, growth tended to be incremental. Imagine the standard of living stretching from 2000 BC to 1500 AD. Ignoring regional anomalies (ex. Rome annexing its neighbours and stealing their wealth, Mehmed II's expansion in the Balkans and Asia minor), there wasn't much economic growth to speak of. Even if you extend that a few thousand years back or hundred years forward, you still won't see much growth.

One hundred years ago, cowboys were shooting injuns in the Wild West. Now west coast hipsters are sitting at a Starbucks on that land with a gorgeous Dell XPS 15, with coffee from Africa, and an iPhone from China that can connect them to billions of people on services created by companies that are now the largest companies in the world despite being less than ten years old. (It's not even regionally isolated; growth like this is occurring in hundreds of countries.) Never before in the world has growth like that been considered the norm.

(Stocks and the growth of the economy aren't directly related. For example, if you have a set of companies taking a progressively bigger slice of the pie, the pie can be shrinking but the companies' stocks be growing.)
« Last Edit: December 05, 2017, 06:46:03 PM by kayvent »

2Birds1Stone

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Re: Bogle's 4% Prediction for the next decade?
« Reply #7 on: December 05, 2017, 07:49:16 PM »
(It's not even regionally isolated; growth like this is occurring in hundreds of countries.)

There are less than 200 countries on our wonderful planet. Just fyi. 
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kayvent

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Re: Bogle's 4% Prediction for the next decade?
« Reply #8 on: December 06, 2017, 08:19:47 PM »
(It's not even regionally isolated; growth like this is occurring in hundreds of countries.)

There are less than 200 countries on our wonderful planet. Just fyi.

204 by my count. The UN recognizes 198. Some of the omissions are more political than nature. For example, China, a founding member of the UN, is no longer a member of the UN despite having a functioning government. The People's Republic Of China has usurped its seat and keeps China out.
« Last Edit: December 06, 2017, 08:21:44 PM by kayvent »

LDoon

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Re: Bogle's 4% Prediction for the next decade?
« Reply #9 on: December 06, 2017, 08:25:54 PM »
Vanguard webcast tonight talked 4-6% return for next 5 or so years.  But, this is factoring in a market correction in next couple years.  So down 10%+ at some point, and then 8-10% for couple years for an overall average of 4-6%.  The basis of the prediction was U.S. market have had the 2nd longest bull run in history, so unlikely to have average returns.  Has to be less than average return at some point...

kayvent

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Re: Bogle's 4% Prediction for the next decade?
« Reply #10 on: December 06, 2017, 08:27:50 PM »
Vanguard webcast tonight talked 4-6% return for next 5 or so years.  But, this is factoring in a market correction in next couple years.  So down 10%+ at some point, and then 8-10% for couple years for an overall average of 4-6%.  The basis of the prediction was U.S. market have had the 2nd longest bull run in history, so unlikely to have average returns.  Has to be less than average return at some point...

Running average can always increase ;)