Vanguard CFP Annual Portfolio Review - Key Points

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Fat-Tailed Contagion
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Vanguard CFP Annual Portfolio Review - Key Points

Post by Fat-Tailed Contagion » Sat Aug 15, 2015 10:10 pm

Vanguard's current recommendations:

- 60/40 US/INTL Equity Allocation

- 70/30 US/INTL Bond Allocation

- 2-3% Bond Return over next 10 yrs

- 5-6% Stock Return over next 10 yrs

- Total Markets approach

- Spending Strategy: 1. RMDs 2. Taxable Accounts 3. Additional IRA withdrawals 4. Roth IRA

Best regards to all and thank you for the ongoing support!
“The intelligent investor is a realist who sells to optimists and buys from pessimists.” | ― Benjamin Graham, The Intelligent Investor

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LAlearning
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Re: Vanguard CFP Annual Portfolio Review - Key Points

Post by LAlearning » Sun Aug 16, 2015 10:56 am

who knows if their future-cast on returns will be right, but it looks a little rosy....
I know nothing!

longinvest
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Re: Vanguard CFP Annual Portfolio Review - Key Points

Post by longinvest » Sun Aug 16, 2015 11:44 am

I don't believe any future return prediction when it is not accompanied with a proper error range: viewtopic.php?f=10&t=170335#p2567570

For instance, error ranges for stocks have no choice to be so wide as to be mostly useless. In other words, nobody can predict future stock returns.
Bogleheads investment philosophy | Lifelong Portfolio: 25% each of (domestic/international)stocks/(nominal/inflation-indexed)bonds | VCN/VXC/VAB/ZRR

SamB
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Re: Vanguard CFP Annual Portfolio Review - Key Points

Post by SamB » Sun Aug 16, 2015 12:17 pm

I am not knocking Vanguard, but I remember my first projections from a Vanguard planner back in the 90's. I think if I lived to be a hundred it indicated I would be worth $95M. Right now I am about $10M behind the projections, and I can think of nothing more irrelevant, other than for a good laugh.

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tyler_cracker
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Re: Vanguard CFP Annual Portfolio Review - Key Points

Post by tyler_cracker » Mon Aug 17, 2015 1:20 am

Fat-Tailed Contagion wrote:- 2-3% Bond Return over next 10 yrs

- 5-6% Stock Return over next 10 yrs


are these nominal rates?

dangerous
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Re: Vanguard CFP Annual Portfolio Review - Key Points

Post by dangerous » Mon Aug 17, 2015 1:33 am

I'm not sure why their expected returns are doubted. A bonds expected return is always equal to its yield, so their 2-3 percent (nominal) projection makes perfect sense as a base case, considering that's what bonds yield.

Stocks real expected returns can be, very dubiously, determined from their PE ratios. The PE ratio of VTI is 19.32, implying an expected return of about 5.2%.

I wouldn't be at all shocked if these basic calculations were all that went into calculating those numbers. But then, I wouldn't be really disappointed, either, since they do seem to be the best way to do anything close to a "10 year forecast" of investment returns. So the only thing that I can really draw from this is that they expect inflation to generally remain quite low.

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Fat-Tailed Contagion
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Re: Vanguard CFP Annual Portfolio Review - Key Points

Post by Fat-Tailed Contagion » Mon Aug 17, 2015 10:39 pm

tyler_cracker wrote:
Fat-Tailed Contagion wrote:- 2-3% Bond Return over next 10 yrs

- 5-6% Stock Return over next 10 yrs


are these nominal rates?


Yes.
“The intelligent investor is a realist who sells to optimists and buys from pessimists.” | ― Benjamin Graham, The Intelligent Investor

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