Ideas & Insights Our Advisors Our Teams Resources White Papers eBook Market Statistics Model Portfolios Important Documents Recommended Readings Calculators What We Do Who We Are Our Story Our Board Members Management Team Governance & Internal Controls Compliance Safe-Keeping your Assets World Class Partners Research Department Perspective Newsletter Careers Contact Us DIY Investing Great Expectations – How to estimate future stock and bond returns when creating a financial plan (2019) Download this Document Published: 2016-03-1 Determining an appropriate asset allocation is one of the most important decisions an investor will ever make. This decision is based on the investor’s ability, willingness and need to take risk. It considers personal factors that will vary among individuals—such as time horizon and comfort level with the ups and downs of the market—but it also requires assumptions about the future returns and volatility of the major asset classes. Consider an investor who is 20 years from retirement and requires a long-term rate of return of 5% for her portfolio to sustain her to age 90. What mix of stocks and bonds might provide that level of growth? And since returns vary from year to year, how bumpy a ride should she expect along the way? A financial planner cannot answer these questions without making assumptions about rates of return and volatility. These assumptions don’t need to be precise, but they must be reasonable. In this paper, we describe the methodology we use to calculate the expected returns and risk level of stocks and bonds, and how we use these assumptions in our clients’ financial plans. This report was written by Raymond Kerzérho and Dan Bortolotti. 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 this Document Contributors Raymond Kerzérho ,CFA, Director of Research Author Raymond contributes to PWL with his thirty years of experience in investment strategy and fixed income portfolio management. Dan Bortolotti ,CFP, CIM®, Portfolio Manager Author Dan works with clients to combine investment management with long-term financial planning. He also promotes investor education through his blog, articles and podcast. Related White Papers Evidence Based Investing Five Factor Investing with ETFs Published: December 23, 2020 Evidence Based Investing The Value Premium: Fact or Fantasy? Published: November 24, 2020 Evidence Based Investing Dollar Cost Averaging vs. Lump Sum Investing Published: June 23, 2020 View All White Papers IIROC AdvisorReport Ideas & Insights Our Advisors Our Teams Resources All Resources White Papers eBook Market Statistics Important Documents Model Portfolios Recommended Readings Calculators Checklists What We Do Who We Are Our Story Our Board Members Management Team Governance & Internal Controls Compliance World Class Partners Research Department Contact Us Client Login PWL Wealth Centrenew My Portfolio + FR
Raymond Kerzérho ,CFA, Director of Research Author Raymond contributes to PWL with his thirty years of experience in investment strategy and fixed income portfolio management.
Dan Bortolotti ,CFP, CIM®, Portfolio Manager Author Dan works with clients to combine investment management with long-term financial planning. He also promotes investor education through his blog, articles and podcast.