[NAFEX] investment return
dwoodard at becon.org
Sat Feb 16 06:47:31 EST 2008
O fluffy one, it pains me to disagree with you, but regretfully I must.
Assuming that your portfolio returns 15% per year net of inflation, over
50 years it would return roughly 1083 to 1.
Now 50 years ago our GDP in Canada was about CDN$2500 per capita and it
is now about CDN$40,000, using nominal dollars, not allowing for
inflation. In industrial economies total wealth is usually about 3 times
GDP so 50 years ago per capita wealth was about $7500 and now it is
about CDN$120,000 - I'll be generous and say now CDN $150,000 partly for
mathematical convenience. So maybe, optimistically, per capita wealth
has increased 20 to 1 in nominal dollars, say 4 to 1 in real dollars.
Can your investment portfolio outperform the market by 250:1 over a long
period? I doubt it. Especially when one considers that industrial growth
over the last 50 years depended on a very large increase in fossil fuel
consumption which seems unlikely to continue.
I think that for calculating lifetime membership fees we should assume
that we are going to get the after-inflation rate of return on
government bonds, maybe 3%. Then we correct for the fact that members
won't live forever. I suspect that a prudent life membership fee would
be quite high.
St. Catharines, Ontario, Canada
fuwa fuwa usagi wrote:
> It was written:
> We're fairly risk-tolerant
> and I'd take 12% all day long if I thought I could get it.
> My reply:
> You can. If you do not know how then I strongly suggest you hire competent financial advisers. With the advent of modern portfolio theory, ETFs, and asset allocation 12% is obtainable with lower risk than stocks or bonds alone.
> As an example my portfolio is designed to return 17.1% with 9.61 standard deviation.
> With a little research you can find a portfolio on-line that has an expected return of 17.15% and a standard deviation of 9.69.
> Just a tip,
> the fluffy bunny
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