October 21, 2021 Personal Wealth White Papers Financial Planning Assumptions Published: October 21, 2021 Introduction In this paper we devise an evidence-based approach for setting expectations for stocks, bonds, bills, inflation, and housing for use in asset allocation and financial planning decisions. This paper marks an evolution in PWL Capital’s methodology which has been in use for more than half a decade. Table of Contents Setting ExpectationsHistorical Returns(Very) Long Run ReturnsDecomposing Historical ReturnsEconomic Variables and PredictabilityRisk or Behavior?Predictability in the LiteratureCombining Historical and Predictive Expected Return EstimatesPredictive Power of Predictive MetricsExpected InflationPrimary ResidenceAsset Class Expected ReturnsMarket-Based Expected ReturnsEquilibrium Cost of CapitalExpected ReturnsExpected Standard DeviationsExpected CorrelationsComposition of Asset Class ReturnsPortfolio Expected Returns This report was written by the Research team at PWL Capital Inc. The ideas, opinions, and recommendations contained in this document are those of the authors and do not necessarily represent the views of PWL Capital Inc. Download Financial Planning Assumptions