What We're Thinking: Real Investments for Real Life

 

There's been a lot of news noise in the past few weeks about the creation of ETFs (exchange-traded funds) that give us a more convenient way to invest speculate in cryptocurrencies.

We covered Cryptocurrencies back in October, 2021. Nothing's happened since then-- including ETF creation-- that's changed our opinion on the topic. In a word: avoid.  

The topic today is real investments for real life. Like stocks and bonds. And specifically, the outlook for 10-year returns. Vanguard, along with the other bigs like Fidelity, JP Morgan, Blackrock, and so on, publish material for advisors to use in guiding their clients. We're going to share that with you right here, right now.

Here's Vanguard's graphic. The light green bar was their outlook at the end of 2021. The solid green was at year-end 2022. And the dark green is the current outlook.

 

Several things pop out.

• The overall outlook changed little from 2022 to 2023.
• The outlook for non-U.S. stocks is better than for U.S. stocks.
• The bond outlook is markedly improved and there's little difference between the U.S. and non-U.S. outlook.
  

So, how does this translate to the portfolios most of us hold? Here are the estimated annual returns by portfolio asset allocation:

50% U.S. & global stocks with 50% U.S. bonds = 6.7%.

This is generally the most conservative portfolio we suggest. The most recent annualized 10-year return was 5.4%.

60% U.S. & global stocks with 40% U.S. bonds = 6.9%.

This is the classic portfolio most people hold. The most recent annualized 10-year return was 6.1%.

70% U.S. & global stocks with 30% U.S. bonds = 7.2%.

Investors willing to endure periodic sharp corrections can lean into this. The most recent annualized 10-year return was 6.8%.

80% U.S. & global stocks with 20% U.S. bonds = 7.5%.

Aggressive investors with a handy supply of Pepto-Bismal and people under age 40 might choose this allocation. The most recent annualized 10-year return was 7.4%.

There you have it. Real investments for real investing for real people. Investments you can live with that are likely to beat inflation and move you toward your goals. Stay the course. Just keep buying. Same as ever. Our only apology here is for the low excitement level. Contact us to talk about your real life.

James Cosgrove, CFP, Plano, TX jim.cosgrove@verizon.net 972-489-0262
Jim Cosgrove, Partner, San Jose, CA jimcos42@gmail.com 408-674-6315

Evidence-based. Rules-driven. Policy-focused.