Author Topic: Long-term expected returns: Crestmont Research  (Read 1071 times)

StreetCat

  • 5 O'Clock Shadow
  • *
  • Posts: 81
Long-term expected returns: Crestmont Research
« on: June 11, 2017, 09:03:20 AM »
https://www.crestmontresearch.com/docs/Stock-Waiting-For-Avg.pdf

The article breaks down the macro components contributing to stock market returns.  Concludes that the historical average return of ~10% per year is unlikely to continue, and that ~6% is more of the norm.  Note that it's not as bad as the seeming 4% reduction, because those are nominal returns and inflation expectations are also low.  But still, even in real terms this is lower than historical average.

This could throw a wrench into the 4% SWR plans.  Have you thought about this and if so do you have any thoughts/plans on dealing with it?

There are several more macro articles on their site: https://www.crestmontresearch.com/stock-market/

And John Bogle, the king of indexing himself, said that returns will be lower going forward: https://www.bogleheads.org/wiki/Historical_and_expected_returns#John_Bogle

And before people start with the "no one can predict the future" line, I will add a note: Yes, no one can deterministically predict the future.  But that doesn't mean that we cannot intelligently anticipate likelihoods.  For example: If John Doe travels from NYC to Syria today and plants to stay there for a week, can anyone predict whether Mr. Doe will die of unnatural causes while in Syria or not?  No, they cannot predict that.  But at the same time, we can reasonably anticipate that Mr. Doe is more likely to die of unnatural causes in Syria tomorrow than he is in NYC.  And possibly take some action to mitigate the risk (postpone the travel if possible, visit another safer place, etc.)

Livewell

  • Stubble
  • **
  • Posts: 179
  • Location: SF Bay Area
Re: Long-term expected returns: Crestmont Research
« Reply #1 on: June 11, 2017, 11:31:52 AM »
MMM's article on the 4% rule and his article on safety margin cover these concerns well.

6% forecast?  Cool.  4% from Bogle?  Fine.  Turns out less, we'll make sure to pull some of those safety levers.  I also like the glide path to equity approach to make the first several years post FIRE less stressful. 

http://www.mrmoneymustache.com/2012/05/29/how-much-do-i-need-for-retirement/


http://www.mrmoneymustache.com/2011/10/17/its-all-about-the-safety-margin/

StreetCat

  • 5 O'Clock Shadow
  • *
  • Posts: 81
Re: Long-term expected returns: Crestmont Research
« Reply #2 on: June 11, 2017, 03:15:36 PM »
Thanks for the links Livewell.  Safety margin is what I need.