Author Topic: Straw poll - 10yr returns.. your expectations  (Read 1112 times)

vand

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Straw poll - 10yr returns.. your expectations
« on: January 13, 2021, 03:20:20 AM »
Straw poll... just curious to what people here think the future holds over the next decade

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1. What do you think the total real return for global stocks will be in 10 years?

ie including all reinvested dividends, in your local currency


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2. What do you think your own portfolio growth rate will be (time-weight, ie not accounting for any additional cashflows) over that time?

It can be higher if you think you are able to outperfrom the wider stock market, or lower if you are happy following more conservative passive approach.


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3. What level of gauranteed real return what level would you be happy to accept?

If someone offered you a deal that you had to put all your eggs in a single basket (ie liquidate all your current investment, plus put all your savings into) over the next decade and offered you a gauranteed real return on it, what rate of return would make you say Yes?

[Caveat here: you can't borrow to invest in this mythical instrument, you can only put in non-leveraged money that you have either already accumulated or will earn in the next 10yrs.]



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For me, I'll go with:

1. 5% real total return.
Slightly lower than the long run, but still a reasonable return for people who keep their money invested. Although I'm a firm believe in valuations, International markets are not horribly expensive so a global basket can still do OK

2. 8%.
Obviously as an at-least partially active investor I think I can beat the market otherwise I'd just be all in passive indexes. (The stats may say my chances are low, but hey that wasn't the question :) )

3. 4.5%. If there was risk-free 10yr inflation linked treasury that yielded 4.5%, meaning my portfolio was guaranteed to grow 55% in real terms by the end of 2031 I would probably be happy to put all my eggs in that basket.

ChpBstrd

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Re: Straw poll - 10yr returns.. your expectations
« Reply #1 on: January 13, 2021, 08:11:52 AM »
1) 4% annualized and a very bumpy ride to get there. Tech bust starts in 2022 or 2023 after a massive 2021.

2) 4.5% due to hedging and selling calls, almost as unrealistic as your estimate:).

3) Corporate bonds or preferred stocks from stable companies yielding 7% would do it for me. I already own a few thousand in student loan bonds (Navient) that I bought a couple years ago when they were yielding 7.5%, and almost went all-in, but the math said no retirement on a 6% WR :(. Now the yield is closer to 6.5%. I also own some REIT preferreds in the 6% range.  PFF and PGF hit 7.5% last April and I chickened out. Now they yield <5%. None of these are 100% guaranteed but I’d feel good about a diversified portfolio of them.
3)a) The spread between 7.5% and 4% is a measure of my uncertainty. I could be wrong and stocks deliver 10% a year for a decade.

YttriumNitrate

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Re: Straw poll - 10yr returns.. your expectations
« Reply #2 on: January 13, 2021, 09:01:04 AM »
1. Inflation adjusted annualized CAGR of 7.0%. It's not different this time.
2. 7.0%. Right in line with #1.
5. An guaranteed real rate of return 5-6% would probably get me to put all my eggs in this mythical basket.

waltworks

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Re: Straw poll - 10yr returns.. your expectations
« Reply #3 on: January 13, 2021, 12:44:58 PM »
1: 5%
2: 5%, I've got way too much fun stuff to do to try to bother beating the market. Money is easy to get if I need to for some reason, I can't get time back.
3: 4%

-W

Alternatepriorities

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Re: Straw poll - 10yr returns.. your expectations
« Reply #4 on: January 13, 2021, 02:37:07 PM »
1: I'll go with it's not very different this time too and say 6-7% world wide. - I do expect it to be bumpy getting there and the growth will likely not be distributed the way it was the past decade. There are a lot of places that need China like growth and might well get it over the next 1o years. If India quadruples it's GDP and all those new consumers buy smart Apple and Google will do alright even if the US market is stagnate. That said, if you think prices are hot now, just wait until Washington throws a couple trillion more on the fire.

2: I'm here out of curiosity. I expect average returns though I did outperform the past year. 6-7%. I'm with Walt here, there is too much living to be done to really spend my time trying to out smart the best people and computers that wallstreet can put together.

3: 6% completely safe would have me walking away with a smile. I could happily live the rest of my life on 6% of my current NW so why be greedy. I'd probably take 5% if the guarantee included that SS will pay out as advertised as that would be the same result.


jpdx

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Re: Straw poll - 10yr returns.. your expectations
« Reply #5 on: January 15, 2021, 01:19:21 AM »
100% chance that nobody knows.

harvestbook

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Re: Straw poll - 10yr returns.. your expectations
« Reply #6 on: January 16, 2021, 12:55:39 PM »
1. 5 percent.
2. I'm not smarter than the market.
3. 5 percent.

American GenX

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Re: Straw poll - 10yr returns.. your expectations
« Reply #7 on: January 16, 2021, 01:43:49 PM »
I think we could be looking at zero real gains over the next decade, just as Jack Bogle predicted some years back, maybe a little later.  There is still time for him to be right.

https://www.benzinga.com/analyst-ratings/analyst-color/15/06/5579993/exclusive-vanguard-founder-john-bogle-projects-nominal-t

And with all the stimulus and minimum wage increases (including Biden wanting to increase it to $15/hr), I think true inflation is going to take off making "true real" returns even less than they might appear on the surface based on government figures.


Pomegranate12

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Re: Straw poll - 10yr returns.. your expectations
« Reply #8 on: January 16, 2021, 01:53:27 PM »
Next 2 years 7 percent returns adjusted for inflation per year
The following 6 years will be 5 percent adjusted for inflation per year
The last 2 years will be -3 percent adjusted for inflation per year so essentially flat market
+/- half a percent error rate

waltworks

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Re: Straw poll - 10yr returns.. your expectations
« Reply #9 on: January 16, 2021, 02:13:57 PM »
I think we could be looking at zero real gains over the next decade, just as Jack Bogle predicted some years back, maybe a little later.  There is still time for him to be right.

https://www.benzinga.com/analyst-ratings/analyst-color/15/06/5579993/exclusive-vanguard-founder-john-bogle-projects-nominal-t

First, the headline is pretty misleading. Bogle predicted around 4% nominal returns for stocks and 2-3 percent for bonds, not zero.

I pour one out for Bogle on the regular, but he (like everyone) didn't do very well with that prediction - the stock market (nominal) basically doubled since then. Inflation adjusted it's up 79%.

Even -10% a year for the next 4 years wouldn't get us back to zero returns from 2015-2024. A great-depression level -16% annualized for 4 years would get us in spitting distance, though.

-W
« Last Edit: January 16, 2021, 02:28:47 PM by waltworks »

vand

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Re: Straw poll - 10yr returns.. your expectations
« Reply #10 on: January 17, 2021, 06:25:56 AM »
For my 3rd question "what gauranteed rate of return would you happily accept?" it's worth pointing out that such implied returns are very acheiveable on the personal finance side of the puzzle by buying things that save you money over the long run.

For example, if you spend a $10k up-front cost to insulate your loft or installing solar panels that will save you $1000/pa on your future energy bills that is the same as a guaranteed, risk-free, after tax, inflation-adjusted 10% perpetual return.

An even more striking example is if I go to the supermarket and they have BOGOF offers non-perishable items.. that allows me to buy eg 2 years' worth of washing powder for the usual price of 1 year then that is the same implied effect as getting a 100% annual investment return - again risk-free, after tax and after inflation.  This is not a compounded annual return however, it's a simple return (you can't buy 10 years' worth of washing powder and get 100%^10 implied return).


Alternatepriorities

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Re: Straw poll - 10yr returns.. your expectations
« Reply #11 on: January 17, 2021, 09:52:29 AM »
For my 3rd question "what gauranteed rate of return would you happily accept?" it's worth pointing out that such implied returns are very acheiveable on the personal finance side of the puzzle by buying things that save you money over the long run.

For example, if you spend a $10k up-front cost to insulate your loft or installing solar panels that will save you $1000/pa on your future energy bills that is the same as a guaranteed, risk-free, after tax, inflation-adjusted 10% perpetual return.

An even more striking example is if I go to the supermarket and they have BOGOF offers non-perishable items.. that allows me to buy eg 2 years' worth of washing powder for the usual price of 1 year then that is the same implied effect as getting a 100% annual investment return - again risk-free, after tax and after inflation.  This is not a compounded annual return however, it's a simple return (you can't buy 10 years' worth of washing powder and get 100%^10 implied return).

I agree with the concept, but in practice it seem "lower risk" rather than risk free. Here at least 10k in insulation and solar panels won't raise the price of the house by 10k. I did an insulation upgrade on a house that had a 25% ROI in lowered heating cost, but I've been told since that it has little impact of the value of the house. It boggles my mind, but buyers are much more concerned with number of sq ft than with the usefulness of that area.

I try to buy enough when I see things at a super sale price that I can make it until the next sale. As a bonus I did not need to hunt for TP last spring!

frugledoc

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Re: Straw poll - 10yr returns.. your expectations
« Reply #12 on: January 17, 2021, 10:06:20 AM »
For my 3rd question "what gauranteed rate of return would you happily accept?" it's worth pointing out that such implied returns are very acheiveable on the personal finance side of the puzzle by buying things that save you money over the long run.

For example, if you spend a $10k up-front cost to insulate your loft or installing solar panels that will save you $1000/pa on your future energy bills that is the same as a guaranteed, risk-free, after tax, inflation-adjusted 10% perpetual return.

An even more striking example is if I go to the supermarket and they have BOGOF offers non-perishable items.. that allows me to buy eg 2 years' worth of washing powder for the usual price of 1 year then that is the same implied effect as getting a 100% annual investment return - again risk-free, after tax and after inflation.  This is not a compounded annual return however, it's a simple return (you can't buy 10 years' worth of washing powder and get 100%^10 implied return).

Yea, I always buy as much non perishable items as possible when discounted.  The only problem is limited storage space.  Recently I bought 60 cans of Diet Coke from
Costco but I would have bought 300 if the wife had allowed.

BicycleB

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Re: Straw poll - 10yr returns.. your expectations
« Reply #13 on: January 17, 2021, 10:34:13 AM »
1. 4% real return for global stocks (just a midpoint in my wide range of "expectations". Attempting to balance "it's not different" vs the chances of "this low rate regime will end badly", "capital is plentiful so returns should be low", "lower population growth means lower contribution to returns and nobody talks about that". Will welcome explanation of why the last 2 concerns are invalid)

2. 3.5%. My portfolio is not all stocks. I expect to get ordinary returns reduced by a small allowance for user error. Why does everyone think their return is equal to stocks? Is everyone using an all-stock portfolio? Isn't anyone accepting a slightly lower return than stocks in exchange for more stability?

3. 5%. First off, while I don't expect high returns, I admit that the market often crushes pessimistic views. My financial assets are the one bit of my overall portfolio that can generate exponential growth higher than 5%. Wouldn't trade that except for a very serious offer. But 5% guaranteed plus inflation adjustment is so far above market that I'd be worried it was Madoff-level BS and still might not take it.
« Last Edit: January 17, 2021, 10:39:47 AM by BicycleB »

vand

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Re: Straw poll - 10yr returns.. your expectations
« Reply #14 on: January 17, 2021, 01:30:02 PM »
For my 3rd question "what gauranteed rate of return would you happily accept?" it's worth pointing out that such implied returns are very acheiveable on the personal finance side of the puzzle by buying things that save you money over the long run.

For example, if you spend a $10k up-front cost to insulate your loft or installing solar panels that will save you $1000/pa on your future energy bills that is the same as a guaranteed, risk-free, after tax, inflation-adjusted 10% perpetual return.

An even more striking example is if I go to the supermarket and they have BOGOF offers non-perishable items.. that allows me to buy eg 2 years' worth of washing powder for the usual price of 1 year then that is the same implied effect as getting a 100% annual investment return - again risk-free, after tax and after inflation.  This is not a compounded annual return however, it's a simple return (you can't buy 10 years' worth of washing powder and get 100%^10 implied return).

Yea, I always buy as much non perishable items as possible when discounted.  The only problem is limited storage space.  Recently I bought 60 cans of Diet Coke from
Costco but I would have bought 300 if the wife had allowed.

Yes, storage is often a constraint on viability here. 

Another good example would be if you still using any incandescent or halogen bulbs to immediately switch them out for energy saving LEDs. While the up-front cost of LEDs is quite expensive, they typically pay themselves back well within a year and then go on to save you a handy little sum per bulb per year for the their entire typical 10-20yr lifespan. One of the best "investments" you can make imo.

Steeze

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Re: Straw poll - 10yr returns.. your expectations
« Reply #15 on: January 17, 2021, 02:14:56 PM »
1.) 4% worldwide
2.) 4% with less volatility through rebalancing
3.) 4% real inflation adjusted*

Inflation would need to be calculated such that it was proportional to my spending habits, not sure CPI is capturing healthcare, childcare, education, housing, and food accurately.

FWIW I have a calculator in my spreadsheet that looks at current CAPE and compares that to historical future 10 year returns. Right now it is saying 1.9%, or 0.5% less the current inflation for all items which sits at 1.4%. That calculator also gives me a caution sign when future 10yr returns is less than 30-yr treasuries, and a warning when less than 10-yr treasuries. Currently 1.85% & 1.11% respectively, giving a “caution” signal.

Not that I do anything with that information, just keep plugging away as usual. I do hope for 7% real return over the next 50 years, and aim for 6% in my portfolio.

EvenSteven

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Re: Straw poll - 10yr returns.. your expectations
« Reply #16 on: January 17, 2021, 06:02:56 PM »
For my 3rd question "what gauranteed rate of return would you happily accept?" it's worth pointing out that such implied returns are very acheiveable on the personal finance side of the puzzle by buying things that save you money over the long run.

For example, if you spend a $10k up-front cost to insulate your loft or installing solar panels that will save you $1000/pa on your future energy bills that is the same as a guaranteed, risk-free, after tax, inflation-adjusted 10% perpetual return.

An even more striking example is if I go to the supermarket and they have BOGOF offers non-perishable items.. that allows me to buy eg 2 years' worth of washing powder for the usual price of 1 year then that is the same implied effect as getting a 100% annual investment return - again risk-free, after tax and after inflation.  This is not a compounded annual return however, it's a simple return (you can't buy 10 years' worth of washing powder and get 100%^10 implied return).

Yea, I always buy as much non perishable items as possible when discounted.  The only problem is limited storage space.  Recently I bought 60 cans of Diet Coke from
Costco but I would have bought 300 if the wife had allowed.

Yes, storage is often a constraint on viability here. 

Another good example would be if you still using any incandescent or halogen bulbs to immediately switch them out for energy saving LEDs. While the up-front cost of LEDs is quite expensive, they typically pay themselves back well within a year and then go on to save you a handy little sum per bulb per year for the their entire typical 10-20yr lifespan. One of the best "investments" you can make imo.

Huh? When was the last time you checked the price on LED light bulbs? I see them on sale regularly for under a dollar each. If that is a quite expensive upfront cost then you have too many lights in your house!!

waltworks

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Re: Straw poll - 10yr returns.. your expectations
« Reply #17 on: January 17, 2021, 06:10:27 PM »
FWIW I have a calculator in my spreadsheet that looks at current CAPE and compares that to historical future 10 year returns.

Why? R2 is like .3 for CAPE/future returns. It's awful for predicting that.

-W

Steeze

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Re: Straw poll - 10yr returns.. your expectations
« Reply #18 on: January 17, 2021, 06:36:22 PM »
FWIW I have a calculator in my spreadsheet that looks at current CAPE and compares that to historical future 10 year returns.

Why? R2 is like .3 for CAPE/future returns. It's awful for predicting that.

-W

Suppose it was a Saturday, saw a bunch of stats on engaging data, had recently learned to reference html in my google sheet, and had read an article not long before about cape adjusted safe withdrawal rates. Not sure there was a point to it all, never did anything with it, but it is there.