[NAFEX] investment return

Douglas Woodard 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.

Yours conservatively,

Doug Woodard
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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