Financial Advice for Retirement, Social Security, IRAs and Estate Planning

Expecting Average Historic Returns

June 26, 2017

This article reports on a new survey conducted for Legg Mason. The survey says most investors expect that in the coming years they expect to earn the average long-term total return of about 8.5% from their portfolios. The article then reports that a large number of investment professionals believe that’s unrealistic and investors are setting themselves up for disappointment.

This new dynamic is no secret to anyone who manages money professionally. It’s alarming that the hundreds of investors surveyed by Legg Mason still have such unrealistic expectations. Alan McKnight, chief investment officer at Regions Wealth Management, said he had seen similarly over-optimistic expectations from nonprofessional investors he’s spoken with. “People want to look on a historical basis as to what they should expect in the future,” he said Friday on Bloomberg Radio.

Many tell McKnight they need 8 percent returns a year; he’ll tell them about 7 percent is more possible over the next five to 10 years and only with more aggressive allocations to equities and emerging markets. About 5 percent is more likely. They’ll often stick with their outlooks anyway.

 

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