Poll - your expected rate of return

[shalab]

Let us do this poll over thanksgiving ( for US based members). The rate of return for equities for the next ten years generally speaking is not very bright. The expected rate of growth is 1% in Europe, 2% in the US and 6% in Asia. Since we are in a cyclical bear market, the one that lasts roughly 20 years, it is unlikely the market will see major upward swing anytime soon.

 

However this group is also unique. We are not dependent on market indices to determine our future. We identify good businesses and allocate capital to the best ideas.

 

So get the vote going and let us see where we land.

 

cheers!

 

[beerbaron]

The next years are going to be tough.

 

Think about the return equity market if countries are forced to raise interests rates a few years from now that, combined with low growth and the future for investors does not look bright. The next 10 years are going to be totally different from the 80-90s that most people are still anchored on.

 

BeerBaron

[mpauls]

40%+

[twacowfca]

A lot less than our rate of return for the last ten years.  Increasing scale is going to be a greater drag, and "pride goeth before a fall".  :)

[ubuy2wron]

I have managed to generate a return in the high teens for the last decade. I suspect that my returns for the next decade will be lower, likely because I am  less willing to take on as much risk  I expect the markets however will produce markedly better returns for the average investor over the next decade vs the last.

[scorpioncapital]

is your question nominal or real return? 25% is easy if inflation is going up 20%.

[Guest broxburnboy]

For those of you expecting >25% return for the next ten years, do you care to explain your methods? You clearly are on a path to do better than Schloss, Buffett, Munger, Hamblin Watsa and other investing greats!

 

 

 

Individual small investors have an advantage over professional money managers in that they can concentrate a larger percentage of their capital if they have a high confidence investment. There is a world of micro and small caps out there that are too small for the big boys (who can be quite dismissive of these) but yield to rational fundamental analysis. You're not wedded to portfolio management theory and don't have to answer to a panicked unit holder when things look grim. You can assume more risk and reap the rewards. (my 12 year annualized compound return on my trading portfolio is ~30% to Dec 2009, currently enjoying a banner +50% year in the world of small cap precious metals)

[Baoxiaodao]

I just want to point out that 99% of people are not as gifted as you. It is easier said than done even though we do have advantages in the micro cap world.

 

 

 

Individual small investors have an advantage over professional money managers in that they can concentrate a larger percentage of their capital if they have a high confidence investment. There is a world of micro and small caps out there that are too small for the big boys (who can be quite dismissive of these) but yield to rational fundamental analysis. You're not wedded to portfolio management theory and don't have to answer to a panicked unit holder when things look grim. You can assume more risk and reap the rewards. (my 12 year annualized compound return on my trading portfolio is ~30% to Dec 2009, currently enjoying a banner +50% year in the world of small cap precious metals)

[Packer16]

I disagree that 99% of the folks cannot beat the market by 5% or more by using the right strategy.  There is a number of folks that cannot beat the market due their constraints (they are mutual funds so they are benchmarked constrained or they are temperment constrainted - buy high sell low).  This has been true for many years. 

 

In the Intelligent Investor, Ben Graham states a 5% outperformance benchmark fort hose who follow the value strategy.  Ben Graham breaks out the areas pretty well where you can outperform: "cheap stocks" (including secondary issues most of the time and primary issues occasionally in bear markets) at at-least 2/3rd of fair value, net working capital and special situation or workouts.  Another key aspect mentioned above is position concentration.  Using these approaches, I have been able to obtain returns in the upper teens over the past 10yrs and the low 20s over the past five.  I have been more focused over the last 5 yrs.  What I find incredible is that record include many wipe-outs and 100% losses including a few cos going into bankruptcy.  The approach is laid out in the Intelligent Investor but the temperment issue is what make it harder than it appears.  You just have to be able to deal with an occasional loss and try to minimize these as much as possible.

 

Packer

 

[Guest broxburnboy]

I just want to point out that 99% of people are not as gifted as you. It is easier said than done even though we do have advantages in the micro cap world.

 

 

 

Individual small investors have an advantage over professional money managers in that they can concentrate a larger percentage of their capital if they have a high confidence investment. There is a world of micro and small caps out there that are too small for the big boys (who can be quite dismissive of these) but yield to rational fundamental analysis. You're not wedded to portfolio management theory and don't have to answer to a panicked unit holder when things look grim. You can assume more risk and reap the rewards. (my 12 year annualized compound return on my trading portfolio is ~30% to Dec 2009, currently enjoying a banner +50% year in the world of small cap precious metals)

 

It's not talent.. it's experience and perserverance.. which for me luckily includes experience in the real business world... where my failures outnumber my successes but lessons were learned. Education and ongoing interest in history and economics are great pluses as is developing an instinctive BS detector.

I made all my rookie market failures when I was young and resilient.. did the churning, the gambling with options, the follow the herd and paid the price early. Or maybe it's just luck... but history does favour the intrepid.

[biaggio]

I disagree that 99% of the folks cannot beat the market by 5% or more by using the right strategy.  T

 

 

 

Packer is this mathematically possible? I think I know what you re trying to say, but 99% of us can t be above average. I agree that if you have the right temperament + follow the right strategy then it is possible.

[twacowfca]

For those of you expecting >25% return for the next ten years, do you care to explain your methods? You clearly are on a path to do better than Schloss, Buffett, Munger, Hamblin Watsa and other investing greats!

 

 

 

Buffett's returns before he started his partnership were> 50%/annum.  :)

 

However, it's helpful to be wired a certain way.  The first time I read The intelligent Investor, my impression was that everything the author said was obvious.  Yet, many intelligent people just don't get it when I tell them clearly the simple secrets of our investing success.

[Guest longinvestor]

For those of you expecting >25% return for the next ten years, do you care to explain your methods? You clearly are on a path to do better than Schloss, Buffett, Munger, Hamblin Watsa and other investing greats!

 

I dont want to challenge this thinking and am pursuing an idea of future giving to a charitable cause. I would love to bake in 25+% return, the charitable cause will be handsomely funded for posterity. 

 

Anybody on this board have estate ideas including future giving? Would love to hear ideas people have for this.

[UhuruPeak]

I disagree that 99% of the folks cannot beat the market by 5% or more by using the right strategy.  T

Packer is this mathematically possible? I think I know what you re trying to say, but 99% of us can t be above average. I agree that if you have the right temperament + follow the right strategy then it is possible.

Couple of things:

1. I don't think Packer necessarily meant that 99% could beat the average by 5%; it could also be read as saying that more than 1% can beat by more than 5%. I will chose to remain agnostic either way

2. It could be mathematically possible if the 99% are small holders on their directly investable assets and the 1% where the large guys and huge funds investing the rest of 'our' money (since 'we' ultimately own everything).

[twacowfca]

For those of you expecting >25% return for the next ten years, do you care to explain your methods? You clearly are on a path to do better than Schloss, Buffett, Munger, Hamblin Watsa and other investing greats!

 

I dont want to challenge this thinking and am pursuing an idea of future giving to a charitable cause. I would love to bake in 25+% return, the charitable cause will be handsomely funded for posterity.  

 

Anybody on this board have estate ideas including future giving? Would love to hear ideas people have for this.

 

 

Suggest you give the relatively small amount you hope to compound at 25+% to a donor advised fund.  Then the returns will compound tax free until you make a large donation in the future to a charity you select. You can make more tax deductible donations in future years that will also compound tax free.  The donor advised fund should allow you to self direct how the funds are invested in the separate donor account set up for your advice.

 

However, it's difficult, if not impossible, to set up a formula that will give a reliable, very high return after the advisor passes away.  This is food for thought. ???

[scorpioncapital]

70% expect a return between 10% and 20%, that leads me to believe returns will be below 10% or above 20%, unless of course everybody here has read Buffett and think 10-20% is what they should expect :)

 

Here's some food for thought, maybe the return you expect should be the return you need to get to achieve your goals - like inflation targeting. Maybe you need 4% to get your nest egg because you started early so why not aim for your 4%, maybe you need 50% and realize you are screwed (maybe the only way to get 50% is to start a new business).

 

 

[Packer16]

What I meant was to rufute the idea that there is some genius or special sause to get returns in excess of the index by 5% and that it is only available to the select few.  The Intelligent Investor and others on this board have proven this.  I agree the ability to concentrate your positions is very important but not required to get the 5% advantage.  If you don't have the temperment to pick stocks, then pick a fund that follows these principles but realize that your ceiling is going to be about Index + 5%. 

 

Packer

 

[rmitz]

70% expect a return between 10% and 20%, that leads me to believe returns will be below 10% or above 20%, unless of course everybody here has read Buffett and think 10-20% is what they should expect :)

 

Here's some food for thought, maybe the return you expect should be the return you need to get to achieve your goals - like inflation targeting. Maybe you need 4% to get your nest egg because you started early so why not aim for your 4%, maybe you need 50% and realize you are screwed (maybe the only way to get 50% is to start a new business).

 

Or people are just being as conservative in their expectations as they should be in their estimates of fair value. :)

[SharperDingaan]

 

If one simply bought quality, & bought well, why would one not expect at least a double within 3 yrs (26% compound ROI)? Even if one were over optimistic, & it actually took 4 years – it is still a 19% compound ROI.

 

The main risk is that what one bought goes insolvent, but if one bought quality & bought cheap – how big can the expected loss really be? & would one really do nothing while it was falling? When money is cheap, & bankers are desperate to push markets, why would one not use modest leverage? (assume 30%)

 

To buy well, one had to have monitored Mr Market and made the right decision at the right time; therefore one can also tell if Mr Market is frothing or not. If one can recognize this, the shares have a cash yield, & the financing is depression era cheap - why would one assume that one could not maintain a positive (or at least neutral) carry over the holding period?

 

27-37% compound return over 3-4 years  [19*1/(1-.3)=27%]

 

SD

 

[ERICOPOLY]

The first time I read The intelligent Investor, my impression was that everything the author said was obvious. 

 

That's pretty much what Jeremy Grantham said -- he just feels like Graham's ideas are a "Duh" (his word).

 

You could summarize The Intelligent Investor as -- "Buy low and sell high".  Obviously, that's a "Duh".  Graham emphasizes that you must appraise the value of the business in order to have an informed opinion of "high" and "low" -- once gain, "Duh".

 

 

 

[twacowfca]

The first time I read The intelligent Investor, my impression was that everything the author said was obvious. 

 

That's pretty much what Jeremy Grantham said -- he just feels like Graham's ideas are a "Duh" (his word).

 

You could summarize The Intelligent Investor as -- "Buy low and sell high".  Obviously, that's a "Duh".  Graham emphasizes that you must appraise the value of the business in order to have an informed opinion of "high" and "low" -- once gain, "Duh".

 

 

 

 

I know an interesting story from a value investor who once had a ten bagger buying a stock that Ben Graham himself trashed, in his own nice way, in the 1973 edition of The Intelligent Investor.  If anyone can guess the name of the stock, I'll tell the story.  :)

[ERICOPOLY]

The first time I read The intelligent Investor, my impression was that everything the author said was obvious. 

 

That's pretty much what Jeremy Grantham said -- he just feels like Graham's ideas are a "Duh" (his word).

 

You could summarize The Intelligent Investor as -- "Buy low and sell high".  Obviously, that's a "Duh".  Graham emphasizes that you must appraise the value of the business in order to have an informed opinion of "high" and "low" -- once gain, "Duh".

 

 

 

 

I know an interesting story from a value investor who once had a ten bagger buying a stock that Ben Graham himself trashed, in his own nice way, in the 1973 edition of The Intelligent Investor.  If anyone can guess the name of the stock, I'll tell the story.  :)

 

 

That was the year I was born.  Around that time,  Graham was telling Davis to buy GEICO -- Graham giving a stock tip! 

 

That was a terrible time to recommend GEICO!!!!  Right before it collapsed.

 

[twacowfca]

The first time I read The intelligent Investor, my impression was that everything the author said was obvious. 

 

That's pretty much what Jeremy Grantham said -- he just feels like Graham's ideas are a "Duh" (his word).

 

You could summarize The Intelligent Investor as -- "Buy low and sell high".  Obviously, that's a "Duh".  Graham emphasizes that you must appraise the value of the business in order to have an informed opinion of "high" and "low" -- once gain, "Duh".

 

 

 

 

I know an interesting story from a value investor who once had a ten bagger buying a stock that Ben Graham himself trashed, in his own nice way, in the 1973 edition of The Intelligent Investor.  If anyone can guess the name of the stock, I'll tell the story.  :)

 

 

That was the year I was born.  Around that time,  Graham was telling Davis to buy GEICO -- Graham giving a stock tip! 

 

That was a terrible time to recommend GEICO!!!!  Right before it collapsed.

 

 

Speaking of the Davis family, there was the spectacle of their holding onto their billion dollar position in AIG after it had grown too complex for them to understand, and seeing it go almost to zero!

 

So much for blindly following gurus or past successes!

[Uccmal]

I expect to do slightly lower than the past few years.  I now have much less leverage, actual and implied.  This year is my worst in 6 so far, with a return of about 12% vs. S&P at 8%.  I dont see what is standing in the way of at least 20% for the next 10.  I would prefer markets to go sideways choppy for the next ten years - makes my job easier. 

 

20% returns - add a zero every 13 years.

 

Anthing better than 15% in this inflation environment is good with me.