Sunday, February 10, 2013

Yet Another Forecast For Lower Returns For The Next Decade

This  Credit Suisse Global Investment Returns Yearbook 2013 by London Business School authors Elroy Dimson, Paul Marsh and Mike Staunton came to my attention this week.  It can be found here.  It is not a "quick read", but does contain lots of information that can be good food for thought. 

One of its conclusions is that
  • Estimated annualized real returns for the next 20-30 years (i.e. the most important time frame for most of us).
    • global equities 3-4%
    • bonds 1%
  • Of course most financial services firms will quote, and generate investment plans around, something like the historical real returns since 1950
    • global equities  6.8%
    • bonds 3.7%
It seems there are more and more forecast coming out like this all the time. Perhaps these forecasters (and CCI) are guilty of just projecting recent results into the future.

Or.....perhaps the demographics, debt levels, artificially low interest rates, technological innovation,etc is driving a meaningful probability of this type of forecast for the next 20 years coming to fruition.  If there is some meaningful probability of this happening, CCI continues to believe that a meaningful portion of a portfolio needs to be geared towards out-performing in this type of environment even at the risk of missing out on upside performance if the market does meet or exceed the results since 1950.  This blog will continue to try to focus discussion on those type of investing ideas.

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