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nafex - Re: [NAFEX] investment return

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  • From: Douglas Woodard <dwoodard@becon.org>
  • To: North American Fruit Explorers <nafex@lists.ibiblio.org>
  • Subject: Re: [NAFEX] investment return
  • Date: Sat, 16 Feb 2008 06:47:31 -0500

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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