Vanguard predicts 10 year equity returns

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miles monroe
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Vanguard predicts 10 year equity returns

Post by miles monroe » Fri Aug 17, 2018 2:11 pm

just listened to yesterdays clark howard podcast where he talked about vanguards predictions of annual equity returns for the next 10 years. i don't know if this is on their website or not.

insert appropriate caveats...

domestic 3%-4%
international 6%-7%

Tamalak
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Re: Vanguard predicts 10 year equity returns

Post by Tamalak » Fri Aug 17, 2018 2:20 pm

Please tell me these are real returns. I suspect not.

Sconie
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Re: Vanguard predicts 10 year equity returns

Post by Sconie » Fri Aug 17, 2018 2:56 pm

Those must be nominal returns----and, IIRC, may be slightly more upbeat that what Vanguard was calling for back in December 2017 when their 2018 Investment Outlook was released.

Thinking back to the start of the year, it was interesting to look-over the "Long Term Return Forecast" synopsis which Morningstar put together:

https://www.morningstar.com/articles/84 ... rns-2.html
I know that you think you understand what you thought I said, but I don't think you realize that what I said is necessarily what I meant......

mega317
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Re: Vanguard predicts 10 year equity returns

Post by mega317 » Fri Aug 17, 2018 2:57 pm

Why do they bother doing this? No one can predict anything.

bgyt
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Re: Vanguard predicts 10 year equity returns

Post by bgyt » Fri Aug 17, 2018 3:08 pm

mega317 wrote:
Fri Aug 17, 2018 2:57 pm
Why do they bother doing this? No one can predict anything.
Vanguard going CYA mode in case the market turns south on Grandma's 401K.

I've noticed that they now load this pessimistic market outlook into their retirement planner as a default low return value.

foxfirev5
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Re: Vanguard predicts 10 year equity returns

Post by foxfirev5 » Fri Aug 17, 2018 4:59 pm

I'm hoping Grandma would have an IRA rather than a 401k.

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willthrill81
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Re: Vanguard predicts 10 year equity returns

Post by willthrill81 » Fri Aug 17, 2018 5:09 pm

Households' average equity allocation, arguably the single best predictor of stock returns, is currently forecasting 3.45% returns over the next ten years, which is in line with most other forecasting tools' prognostications. We'll see.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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willthrill81
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Re: Vanguard predicts 10 year equity returns

Post by willthrill81 » Fri Aug 17, 2018 5:12 pm

Tamalak wrote:
Fri Aug 17, 2018 2:20 pm
Please tell me these are real returns. I suspect not.
I'm pretty sure those are real return estimates.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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JoMoney
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Re: Vanguard predicts 10 year equity returns

Post by JoMoney » Fri Aug 17, 2018 5:21 pm

willthrill81 wrote:
Fri Aug 17, 2018 5:12 pm
Tamalak wrote:
Fri Aug 17, 2018 2:20 pm
Please tell me these are real returns. I suspect not.
I'm pretty sure those are real return estimates.
Investment grade corporate bonds are yielding more than 3-4% nominal, if that's their expectation for equities as well... hmm.. :annoyed
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham

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willthrill81
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Re: Vanguard predicts 10 year equity returns

Post by willthrill81 » Fri Aug 17, 2018 5:22 pm

JoMoney wrote:
Fri Aug 17, 2018 5:21 pm
willthrill81 wrote:
Fri Aug 17, 2018 5:12 pm
Tamalak wrote:
Fri Aug 17, 2018 2:20 pm
Please tell me these are real returns. I suspect not.
I'm pretty sure those are real return estimates.
Investment grade corporate bonds are yielding 3-4% nominal, if that's their expectation for equities as well... hmm.. :annoyed
Precisely. If those were real returns estimates and I thought that's why I would get (I'm a trend follower, so my returns will be different from the market's), then I'd be taking a hard look at TIPS right now.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

venkman
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Re: Vanguard predicts 10 year equity returns

Post by venkman » Fri Aug 17, 2018 8:55 pm

willthrill81 wrote:
Fri Aug 17, 2018 5:12 pm
Tamalak wrote:
Fri Aug 17, 2018 2:20 pm
Please tell me these are real returns. I suspect not.
I'm pretty sure those are real return estimates.
Those are predicted nominal returns.
https://advisors.vanguard.com/iwe/pdf/FA863418.pdf

They're predicting inflation will stay around 2%, so real US market returns of 1-3% over the next decade.

totesmagotes
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Re: Vanguard predicts 10 year equity returns

Post by totesmagotes » Fri Aug 17, 2018 9:13 pm

venkman wrote:
Fri Aug 17, 2018 8:55 pm
willthrill81 wrote:
Fri Aug 17, 2018 5:12 pm
Tamalak wrote:
Fri Aug 17, 2018 2:20 pm
Please tell me these are real returns. I suspect not.
I'm pretty sure those are real return estimates.
Those are predicted nominal returns.
https://advisors.vanguard.com/iwe/pdf/FA863418.pdf

They're predicting inflation will stay around 2%, so real US market returns of 1-3% over the next decade.
10-yr treasury bonds yield nearly 3% now. If that holds, predicted 3-4% nominal on US equities means Vanguard is expecting no equity premium over the next decade, at least none over the nearly completely safe 10 yr tbond. Yuck. The insinuation seems to be that PE ratios will revert to the mean. I'm early career and I'm the accumulation phase, so I guess I don't mind if equity prices stagnate a bit now (considering dividend yield, VG is forecasting very little rise in equity prices, assuming their forecast is for nominal total return).

How did their 10yr forecasts from 2008-2009 do?

mikeyzito22
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Re: Vanguard predicts 10 year equity returns

Post by mikeyzito22 » Fri Aug 17, 2018 9:38 pm

totesmagotes wrote:
Fri Aug 17, 2018 9:13 pm
venkman wrote:
Fri Aug 17, 2018 8:55 pm
willthrill81 wrote:
Fri Aug 17, 2018 5:12 pm
Tamalak wrote:
Fri Aug 17, 2018 2:20 pm
Please tell me these are real returns. I suspect not.
I'm pretty sure those are real return estimates.
Those are predicted nominal returns.
https://advisors.vanguard.com/iwe/pdf/FA863418.pdf

They're predicting inflation will stay around 2%, so real US market returns of 1-3% over the next decade.
10-yr treasury bonds yield nearly 3% now. If that holds, predicted 3-4% nominal on US equities means Vanguard is expecting no equity premium over the next decade, at least none over the nearly completely safe 10 yr tbond. Yuck. The insinuation seems to be that PE ratios will revert to the mean. I'm early career and I'm the accumulation phase, so I guess I don't mind if equity prices stagnate a bit now (considering dividend yield, VG is forecasting very little rise in equity prices, assuming their forecast is for nominal total return).

How did their 10yr forecasts from 2008-2009 do?
Here's a question. You say you are in the accumulation phase. When do you know you are not in the accumulation phase anymore?

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willthrill81
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Re: Vanguard predicts 10 year equity returns

Post by willthrill81 » Fri Aug 17, 2018 9:39 pm

mikeyzito22 wrote:
Fri Aug 17, 2018 9:38 pm
totesmagotes wrote:
Fri Aug 17, 2018 9:13 pm
venkman wrote:
Fri Aug 17, 2018 8:55 pm
willthrill81 wrote:
Fri Aug 17, 2018 5:12 pm
Tamalak wrote:
Fri Aug 17, 2018 2:20 pm
Please tell me these are real returns. I suspect not.
I'm pretty sure those are real return estimates.
Those are predicted nominal returns.
https://advisors.vanguard.com/iwe/pdf/FA863418.pdf

They're predicting inflation will stay around 2%, so real US market returns of 1-3% over the next decade.
10-yr treasury bonds yield nearly 3% now. If that holds, predicted 3-4% nominal on US equities means Vanguard is expecting no equity premium over the next decade, at least none over the nearly completely safe 10 yr tbond. Yuck. The insinuation seems to be that PE ratios will revert to the mean. I'm early career and I'm the accumulation phase, so I guess I don't mind if equity prices stagnate a bit now (considering dividend yield, VG is forecasting very little rise in equity prices, assuming their forecast is for nominal total return).

How did their 10yr forecasts from 2008-2009 do?
Here's a question. You say you are in the accumulation phase. When do you know you are not in the accumulation phase anymore?
When you're in the withdrawal phase.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

mikeyzito22
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Re: Vanguard predicts 10 year equity returns

Post by mikeyzito22 » Fri Aug 17, 2018 9:48 pm

willthrill81 wrote:
Fri Aug 17, 2018 9:39 pm
mikeyzito22 wrote:
Fri Aug 17, 2018 9:38 pm
totesmagotes wrote:
Fri Aug 17, 2018 9:13 pm
venkman wrote:
Fri Aug 17, 2018 8:55 pm
willthrill81 wrote:
Fri Aug 17, 2018 5:12 pm


I'm pretty sure those are real return estimates.
Those are predicted nominal returns.
https://advisors.vanguard.com/iwe/pdf/FA863418.pdf

They're predicting inflation will stay around 2%, so real US market returns of 1-3% over the next decade.
10-yr treasury bonds yield nearly 3% now. If that holds, predicted 3-4% nominal on US equities means Vanguard is expecting no equity premium over the next decade, at least none over the nearly completely safe 10 yr tbond. Yuck. The insinuation seems to be that PE ratios will revert to the mean. I'm early career and I'm the accumulation phase, so I guess I don't mind if equity prices stagnate a bit now (considering dividend yield, VG is forecasting very little rise in equity prices, assuming their forecast is for nominal total return).

How did their 10yr forecasts from 2008-2009 do?
Here's a question. You say you are in the accumulation phase. When do you know you are not in the accumulation phase anymore?
When you're in the withdrawal phase.
So I guess I'm a little out of touch. What about when I have enough and don't need to withdrawal quite yet. Am I still in the accumulation phase and should be aggressive? I realize you should become more conservative as time goes on, but if I never withdraw or withdraw oh so slightly, am I still in the accumulation phase? Must be just a matter of semantics.

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munemaker
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Re: Vanguard predicts 10 year equity returns

Post by munemaker » Fri Aug 17, 2018 9:49 pm

mikeyzito22 wrote:
Fri Aug 17, 2018 9:38 pm
When do you know you are not in the accumulation phase anymore?
When you are working for money and contributing to retirement and savings accounts, building up your social security and possibly pension, you are in the accumulation phase.

When you are not working for money, drawing on your social security/pension and possibly withdrawing from your portfolio, then you are no longer in the accumulation phase; you are in the decumulation phase.

Whether or not you have enough does not have anything to do with whether you are in the accumulation or decumulation phase.
Last edited by munemaker on Fri Aug 17, 2018 9:50 pm, edited 1 time in total.

mikeyzito22
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Re: Vanguard predicts 10 year equity returns

Post by mikeyzito22 » Fri Aug 17, 2018 9:50 pm

munemaker wrote:
Fri Aug 17, 2018 9:49 pm
mikeyzito22 wrote:
Fri Aug 17, 2018 9:38 pm
When do you know you are not in the accumulation phase anymore?
When you are working for money and contributing to retirement and savings accounts, building up your social security and possibly pension, you are in the accumulation phase.

When you are not working for money, drawing on your social security/pension and possibly withdrawing from your portfolio, then you are no longer in the accumulation phase; you are in the decumulation phase.
Thanks!

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willthrill81
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Re: Vanguard predicts 10 year equity returns

Post by willthrill81 » Fri Aug 17, 2018 9:56 pm

mikeyzito22 wrote:
Fri Aug 17, 2018 9:48 pm
willthrill81 wrote:
Fri Aug 17, 2018 9:39 pm
mikeyzito22 wrote:
Fri Aug 17, 2018 9:38 pm
totesmagotes wrote:
Fri Aug 17, 2018 9:13 pm
venkman wrote:
Fri Aug 17, 2018 8:55 pm


Those are predicted nominal returns.
https://advisors.vanguard.com/iwe/pdf/FA863418.pdf

They're predicting inflation will stay around 2%, so real US market returns of 1-3% over the next decade.
10-yr treasury bonds yield nearly 3% now. If that holds, predicted 3-4% nominal on US equities means Vanguard is expecting no equity premium over the next decade, at least none over the nearly completely safe 10 yr tbond. Yuck. The insinuation seems to be that PE ratios will revert to the mean. I'm early career and I'm the accumulation phase, so I guess I don't mind if equity prices stagnate a bit now (considering dividend yield, VG is forecasting very little rise in equity prices, assuming their forecast is for nominal total return).

How did their 10yr forecasts from 2008-2009 do?
Here's a question. You say you are in the accumulation phase. When do you know you are not in the accumulation phase anymore?
When you're in the withdrawal phase.
So I guess I'm a little out of touch. What about when I have enough and don't need to withdrawal quite yet. Am I still in the accumulation phase and should be aggressive? I realize you should become more conservative as time goes on, but if I never withdraw or withdraw oh so slightly, am I still in the accumulation phase? Must be just a matter of semantics.
If you aren't withdrawing, then you're still accumulating. Presumably, your portfolio will still have positive real returns, hence you will be accumulating even without contributions. For many people, capital appreciation, dividends, and interest are a bigger dollar amount than their contributions by the time they begin the withdrawal phase.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

mikeyzito22
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Re: Vanguard predicts 10 year equity returns

Post by mikeyzito22 » Fri Aug 17, 2018 10:04 pm

willthrill81 wrote:
Fri Aug 17, 2018 9:56 pm
mikeyzito22 wrote:
Fri Aug 17, 2018 9:48 pm
willthrill81 wrote:
Fri Aug 17, 2018 9:39 pm
mikeyzito22 wrote:
Fri Aug 17, 2018 9:38 pm
totesmagotes wrote:
Fri Aug 17, 2018 9:13 pm


10-yr treasury bonds yield nearly 3% now. If that holds, predicted 3-4% nominal on US equities means Vanguard is expecting no equity premium over the next decade, at least none over the nearly completely safe 10 yr tbond. Yuck. The insinuation seems to be that PE ratios will revert to the mean. I'm early career and I'm the accumulation phase, so I guess I don't mind if equity prices stagnate a bit now (considering dividend yield, VG is forecasting very little rise in equity prices, assuming their forecast is for nominal total return).

How did their 10yr forecasts from 2008-2009 do?
Here's a question. You say you are in the accumulation phase. When do you know you are not in the accumulation phase anymore?
When you're in the withdrawal phase.
So I guess I'm a little out of touch. What about when I have enough and don't need to withdrawal quite yet. Am I still in the accumulation phase and should be aggressive? I realize you should become more conservative as time goes on, but if I never withdraw or withdraw oh so slightly, am I still in the accumulation phase? Must be just a matter of semantics.
If you aren't withdrawing, then you're still accumulating. Presumably, your portfolio will still have positive real returns, hence you will be accumulating even without contributions. For many people, capital appreciation, dividends, and interest are a bigger dollar amount than their contributions by the time they begin the withdrawal phase.
Sounds good! Looking forward to it :)

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Sandtrap
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Re: Vanguard predicts 10 year equity returns

Post by Sandtrap » Fri Aug 17, 2018 10:07 pm

miles monroe wrote:
Fri Aug 17, 2018 2:11 pm
just listened to yesterdays clark howard podcast where he talked about vanguards predictions of annual equity returns for the next 10 years. i don't know if this is on their website or not.

insert appropriate caveats...

domestic 3%-4%
international 6%-7%
So if you have 10X in retirement, is it enough?
25X enough?
More?
What are the alternatives?
R/E Income Property?
TIPS?
etc?

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Taylor Larimore
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Predicting the stock market.

Post by Taylor Larimore » Fri Aug 17, 2018 10:16 pm

Bogleheads:

At one time I was a market timer and published a market-timing letter. It was one of the biggest mistakes of my life.

In my opinion, no one can predict the stock market. We get what the market gives.

Best wishes
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle

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tennisplyr
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Re: Vanguard predicts 10 year equity returns

Post by tennisplyr » Sat Aug 18, 2018 7:01 am

While it's good to prepare for the future, there is way too much discussion here about something we can't control.
Those who move forward with a happy spirit will find that things always work out.

UpperNwGuy
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Re: Vanguard predicts 10 year equity returns

Post by UpperNwGuy » Sat Aug 18, 2018 7:08 am

miles monroe wrote:
Fri Aug 17, 2018 2:11 pm
just listened to yesterdays clark howard podcast where he talked about vanguards predictions of annual equity returns for the next 10 years. i don't know if this is on their website or not.

insert appropriate caveats...

domestic 3%-4%
international 6%-7%
They're predicting international will turn the corner and head back up in a big way!

tibbitts
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Re: Vanguard predicts 10 year equity returns

Post by tibbitts » Sat Aug 18, 2018 7:13 am

UpperNwGuy wrote:
Sat Aug 18, 2018 7:08 am
miles monroe wrote:
Fri Aug 17, 2018 2:11 pm
just listened to yesterdays clark howard podcast where he talked about vanguards predictions of annual equity returns for the next 10 years. i don't know if this is on their website or not.

insert appropriate caveats...

domestic 3%-4%
international 6%-7%
They're predicting international will turn the corner and head back up in a big way!
Not really - just somewhat less poor returns than domestic.

lacseul
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Re: Vanguard predicts 10 year equity returns

Post by lacseul » Sat Aug 18, 2018 7:14 am

Predicting is hard - esp. about the future.

dknightd
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Re: Vanguard predicts 10 year equity returns

Post by dknightd » Sat Aug 18, 2018 7:31 am

foxfirev5 wrote:
Fri Aug 17, 2018 4:59 pm
I'm hoping Grandma would have an IRA rather than a 401k.
Why? Do you expect returns to somehow be better in an IRA vs a 401k?
Or are you just assuming that expenses are lower in an ira compared to a 401?
That might be true if your 401 is expensive and you pick a better IRA.
But the difference is probably small - well within the error of any of these forecasts.

I'm not planning for Grandma, she is dead, I'm planning for myself and DW. Too bad grandma had no money to leave me. For now I'm assuming that my real returns over the next 10 years will be zero. I just hope they keep up with inflation!

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Re: Vanguard predicts 10 year equity returns

Post by steve321 » Sat Aug 18, 2018 7:33 am

so if all experts agree that US will do worse than Int'l over the next 10 years, https://www.morningstar.com/articles/84 ... rns-2.html why are there people here who say you don't need Int'l? (based on last 10 years results I guess)
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Re: Vanguard predicts 10 year equity returns

Post by Wildebeest » Sat Aug 18, 2018 8:03 am

steve321 wrote:
Sat Aug 18, 2018 7:33 am
so if all experts agree that US will do worse than Int'l over the next 10 years, https://www.morningstar.com/articles/84 ... rns-2.html why are there people here who say you don't need Int'l? (based on last 10 years results I guess)
Because: ” “Nobody knows nothing.” Theses are the words that Vanguard founder, Jack Bogle, heard from a financial services industry veteran when Mr. Bogle first started in the industry. ... The concept that “nobody knows nothing” had a profound effect on Mr. Bogle, thus he still quotes this phrase today.
The Golden Rule: One should treat others as one would like others to treat oneself.

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Re: Vanguard predicts 10 year equity returns

Post by steve321 » Sat Aug 18, 2018 8:19 am

Wildebeest wrote:
Sat Aug 18, 2018 8:03 am
steve321 wrote:
Sat Aug 18, 2018 7:33 am
so if all experts agree that US will do worse than Int'l over the next 10 years, https://www.morningstar.com/articles/84 ... rns-2.html why are there people here who say you don't need Int'l? (based on last 10 years results I guess)
Because: ” “Nobody knows nothing.” Theses are the words that Vanguard founder, Jack Bogle, heard from a financial services industry veteran when Mr. Bogle first started in the industry. ... The concept that “nobody knows nothing” had a profound effect on Mr. Bogle, thus he still quotes this phrase today.
then why did Jack Bogle himself make forecasts, as well as a model to calculate what future returns you may reasonably expect? (see fpr example page 47 here http://johncbogle.com/wordpress/wp-cont ... 4-2015.pdf
Success does not bring happiness. In fact, happiness IS success. | 'There are only two tragedies in life: one is not getting what one wants, and the other is getting it.' Oscar Wilde

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Re: Predicting the stock market.

Post by bgyt » Sat Aug 18, 2018 8:41 am

Taylor Larimore wrote:
Fri Aug 17, 2018 10:16 pm
Bogleheads:

At one time I was a market timer and published a market-timing letter. It was one of the biggest mistakes of my life.

In my opinion, no one can predict the stock market. We get what the market gives.

Best wishes
Taylor
I see one of Taylor's roles in this community now is to gently nudge the children who are looking too close at the statistical projections (me) back on the path. I'm sure it gets tiresome, but it is appreciated.

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Re: Vanguard predicts 10 year equity returns

Post by Wildebeest » Sat Aug 18, 2018 8:42 am

steve321 wrote:
Sat Aug 18, 2018 8:19 am
Wildebeest wrote:
Sat Aug 18, 2018 8:03 am
steve321 wrote:
Sat Aug 18, 2018 7:33 am
so if all experts agree that US will do worse than Int'l over the next 10 years, https://www.morningstar.com/articles/84 ... rns-2.html why are there people here who say you don't need Int'l? (based on last 10 years results I guess)
Because: ” “Nobody knows nothing.” Theses are the words that Vanguard founder, Jack Bogle, heard from a financial services industry veteran when Mr. Bogle first started in the industry. ... The concept that “nobody knows nothing” had a profound effect on Mr. Bogle, thus he still quotes this phrase today.
then why did Jack Bogle himself make forecasts, as well as a model to calculate what future returns you may reasonably expect? (see fpr example page 47 here http://johncbogle.com/wordpress/wp-cont ... 4-2015.pdf


This would be an excellent question to ask Jack Bogle on the next Bogleheads conference.

I believe John C Bogle to be a great man. I do not follow his wisdom regarding investing internationally . I never could put my brain around "the reversion to the mean" either. I was very encouraged reading Taleb's Black Swan, while I liked his "Fooled by Randomness" better.
The Golden Rule: One should treat others as one would like others to treat oneself.

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Re: Vanguard predicts 10 year equity returns

Post by steve321 » Sat Aug 18, 2018 9:03 am

Wildebeest wrote:
Sat Aug 18, 2018 8:42 am
steve321 wrote:
Sat Aug 18, 2018 8:19 am
Wildebeest wrote:
Sat Aug 18, 2018 8:03 am
steve321 wrote:
Sat Aug 18, 2018 7:33 am
so if all experts agree that US will do worse than Int'l over the next 10 years, https://www.morningstar.com/articles/84 ... rns-2.html why are there people here who say you don't need Int'l? (based on last 10 years results I guess)
Because: ” “Nobody knows nothing.” Theses are the words that Vanguard founder, Jack Bogle, heard from a financial services industry veteran when Mr. Bogle first started in the industry. ... The concept that “nobody knows nothing” had a profound effect on Mr. Bogle, thus he still quotes this phrase today.
then why did Jack Bogle himself make forecasts, as well as a model to calculate what future returns you may reasonably expect? (see fpr example page 47 here http://johncbogle.com/wordpress/wp-cont ... 4-2015.pdf


This would be an excellent question to ask Jack Bogle on the next Bogleheads conference.

I believe John C Bogle to be a great man. I do not follow his wisdom regarding investing internationally . I never could put my brain around "the reversion to the mean" either. I was very encouraged reading Taleb's Black Swan, while I liked his "Fooled by Randomness" better.
I haven't read Taleb's books but he comes across as a very arrogant man in the interviews I watched. The one thing by him that I have enjoyed are his comments on Sam Harris work.
Success does not bring happiness. In fact, happiness IS success. | 'There are only two tragedies in life: one is not getting what one wants, and the other is getting it.' Oscar Wilde

3funder
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Re: Vanguard predicts 10 year equity returns

Post by 3funder » Sat Aug 18, 2018 9:38 am

Tamalak wrote:
Fri Aug 17, 2018 2:20 pm
Please tell me these are real returns. I suspect not.
They are definitely nominal.

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Re: Vanguard predicts 10 year equity returns

Post by 3funder » Sat Aug 18, 2018 9:43 am

UpperNwGuy wrote:
Sat Aug 18, 2018 7:08 am
miles monroe wrote:
Fri Aug 17, 2018 2:11 pm
just listened to yesterdays clark howard podcast where he talked about vanguards predictions of annual equity returns for the next 10 years. i don't know if this is on their website or not.

insert appropriate caveats...

domestic 3%-4%
international 6%-7%
They're predicting international will turn the corner and head back up in a big way!
I just expect that international returns will be higher than domestic returns. I don't think in terms of exactly 10 years, though; I think in terms of an intermediate time frame.

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Wildebeest
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Re: Vanguard predicts 10 year equity returns

Post by Wildebeest » Sat Aug 18, 2018 9:58 am

duplicate.
Last edited by Wildebeest on Sat Aug 18, 2018 10:02 am, edited 1 time in total.
The Golden Rule: One should treat others as one would like others to treat oneself.

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Wildebeest
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Re: Vanguard predicts 10 year equity returns

Post by Wildebeest » Sat Aug 18, 2018 10:01 am

steve321 wrote:
Sat Aug 18, 2018 9:03 am
Wildebeest wrote:
Sat Aug 18, 2018 8:42 am
steve321 wrote:
Sat Aug 18, 2018 8:19 am
Wildebeest wrote:
Sat Aug 18, 2018 8:03 am
steve321 wrote:
Sat Aug 18, 2018 7:33 am
so if all experts agree that US will do worse than Int'l over the next 10 years, https://www.morningstar.com/articles/84 ... rns-2.html why are there people here who say you don't need Int'l? (based on last 10 years results I guess)
Because: ” “Nobody knows nothing.” Theses are the words that Vanguard founder, Jack Bogle, heard from a financial services industry veteran when Mr. Bogle first started in the industry. ... The concept that “nobody knows nothing” had a profound effect on Mr. Bogle, thus he still quotes this phrase today.
then why did Jack Bogle himself make forecasts, as well as a model to calculate what future returns you may reasonably expect? (see fpr example page 47 here http://johncbogle.com/wordpress/wp-cont ... 4-2015.pdf


This would be an excellent question to ask Jack Bogle on the next Bogleheads conference.

I believe John C Bogle to be a great man. I do not follow his wisdom regarding investing internationally . I never could put my brain around "the reversion to the mean" either. I was very encouraged reading Taleb's Black Swan, while I liked his "Fooled by Randomness" better.
I haven't read Taleb's books but he comes across as a very arrogant man in the interviews I watched. The one thing by him that I have enjoyed are his comments on Sam Harris work.
Nassim Taleb is not a great man in my book. For me reading his books reinforces that he is an arrogant narcissist, however I like what he has to say and the way he has broadened my horizon.
The Golden Rule: One should treat others as one would like others to treat oneself.

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Re: Vanguard predicts 10 year equity returns

Post by abuss368 » Sat Aug 18, 2018 7:47 pm

miles monroe wrote:
Fri Aug 17, 2018 2:11 pm
just listened to yesterdays clark howard podcast where he talked about vanguards predictions of annual equity returns for the next 10 years. i don't know if this is on their website or not.

insert appropriate caveats...

domestic 3%-4%
international 6%-7%
Hi miles monroe -

I am unsure how anyone can predict the stock or bonds markets for that matter with any degree of certainty. I would ignore the noise and stay the course!

Best.
John C. Bogle: "You simply do not need to put your money into 8 different mutual funds!" | | Disclosure: Three Fund Portfolio + U.S. & International REITs

VaR
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Re: Vanguard predicts 10 year equity returns

Post by VaR » Sat Aug 18, 2018 8:01 pm

miles monroe wrote:
Fri Aug 17, 2018 2:11 pm
just listened to yesterdays clark howard podcast where he talked about vanguards predictions of annual equity returns for the next 10 years. i don't know if this is on their website or not.

insert appropriate caveats...

domestic 3%-4%
international 6%-7%
Is this the official prediction of Vanguard the institution? It is at least what one of their senior analysts in their Investment Strategy Group said in a webcast. What exactly did Clark Howard say? I didn't think that Vanguard would predict 10 year equity returns within such a small band.
Andrew Patterson wrote: Nominal returns, particularly here in the United States, on the equity
side, [are] likely to be very muted. When I say muted, we’re talking about a central
tendency of around 3% to 5%, compared with a historic average of closer to 9% to 11%
on an annualized basis. Right, and that’s over the next ten years. To say that we won’t have
years that outperform, that could reach double-digit returns, or years that will underperform
with negative returns in the year, we can’t say with precision when that will occur. But
on an annualized ten-year outlook, our views on the U.S. equities is much more guarded
maybe than it would have been in the past.

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Re: Vanguard predicts 10 year equity returns

Post by Kevin M » Sat Aug 18, 2018 8:30 pm

VaR wrote:
Sat Aug 18, 2018 8:01 pm
I didn't think that Vanguard would predict 10 year equity returns within such a small band.
As you showed in the part you quoted, this is what Vanguard calls a central tendency:
Andrew Patterson wrote: Nominal returns, particularly here in the United States, on the equity
side, [are] likely to be very muted. When I say muted, we’re talking about a central
tendency
of around 3% to 5%, compared with a historic average of closer to 9% to 11%
on an annualized basis.
Central tendency is the middle part of an estimated probability distribution. The extremes of the probability distribution are much lower on the left side (less than 0%), and much higher on the right side (more than 10%). You can get more details by reading Vanguard's economic and market outlook for 2018, although the article being discussed here is more recent.

It's important to note that Vanguard is not making a point prediction about 10-year returns, but consistent with the science of investing (one of William Bernstein's four pillars), is estimating a probability distribution of returns. This has nothing to do with market timing.

Unless you have some estimate of returns (and risks), even if it's as crude as "stocks are likely to return more than bonds, but are riskier than bonds", then how do you decide on an asset allocation? Vanguard is just trying to use the best tools at its disposal to set what they consider to be reasonable expectations about return probability distributions, which they hope will be useful to investors in deciding on asset allocation, savings rates, etc.

Kevin
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camillus
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Re: Vanguard predicts 10 year equity returns

Post by camillus » Sat Aug 18, 2018 8:40 pm

What is actionable?

Perhaps a gut check on asset allocation.

What would you all think about reconsidering adding other diversifiers to a portfolio, say REITS? I was not strongly considering this before, but if Vanguard is telling me that domestic equities are not going to do well then perhaps I need to diversify a bit more. I have been otherwise drawn to a 3-fund portfolio.

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Re: Vanguard predicts 10 year equity returns

Post by Dottie57 » Sat Aug 18, 2018 8:58 pm

mikeyzito22 wrote:
Fri Aug 17, 2018 9:38 pm
totesmagotes wrote:
Fri Aug 17, 2018 9:13 pm
venkman wrote:
Fri Aug 17, 2018 8:55 pm
willthrill81 wrote:
Fri Aug 17, 2018 5:12 pm
Tamalak wrote:
Fri Aug 17, 2018 2:20 pm
Please tell me these are real returns. I suspect not.
I'm pretty sure those are real return estimates.
Those are predicted nominal returns.
https://advisors.vanguard.com/iwe/pdf/FA863418.pdf

They're predicting inflation will stay around 2%, so real US market returns of 1-3% over the next decade.
10-yr treasury bonds yield nearly 3% now. If that holds, predicted 3-4% nominal on US equities means Vanguard is expecting no equity premium over the next decade, at least none over the nearly completely safe 10 yr tbond. Yuck. The insinuation seems to be that PE ratios will revert to the mean. I'm early career and I'm the accumulation phase, so I guess I don't mind if equity prices stagnate a bit now (considering dividend yield, VG is forecasting very little rise in equity prices, assuming their forecast is for nominal total return).

How did their 10yr forecasts from 2008-2009 do?
Here's a question. You say you are in the accumulation phase. When do you know you are not in the accumulation phase anymore?
When you start disbursement’s from retirement accounts.

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Re: Vanguard predicts 10 year equity returns

Post by wootwoot » Sat Aug 18, 2018 9:00 pm

How many times are we going to rehash this conversation? Nobody has a crystal ball and market timing is not the boglehead way. This thread is not actionable.

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Re: Vanguard predicts 10 year equity returns

Post by Kevin M » Sat Aug 18, 2018 9:03 pm

camillus wrote:
Sat Aug 18, 2018 8:40 pm
What is actionable?

Perhaps a gut check on asset allocation.

What would you all think about reconsidering adding other diversifiers to a portfolio, say REITS? I was not strongly considering this before, but if Vanguard is telling me that domestic equities are not going to do well then perhaps I need to diversify a bit more. I have been otherwise drawn to a 3-fund portfolio.
You have all you need in the 3-fund portfolio for Vanguard's return probability distribution estimates to be actionable, assuming you have confidence in them.

One action is to not abandon your international stock allocation, and not avoid rebalancing into international stocks. There's a very long, active thread going on in which the OP is discussing throwing in the towel on international stocks due to multiple years of under-performance. Vanguard's higher central tendency estimates for 10-year returns on international stocks might help you not do what the OP in that thread is advocating.

Another action might be to allow your international stock allocation to drift more toward the upper end of your rebalancing band, assuming you use rebalancing bands as part of your investment policy. Or maybe you even increase your international allocation a bit.

Another action might be to increase your savings rate if your savings rate has been based on the assumption of 10% stock returns.

Although I own a relatively small REIT allocation, I would not recommend adding REITs, especially if you tend toward the simplicity of a 3-fund portfolio.

Kevin
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Re: Vanguard predicts 10 year equity returns

Post by Kevin M » Sat Aug 18, 2018 9:08 pm

wootwoot wrote:
Sat Aug 18, 2018 9:00 pm
How many times are we going to rehash this conversation? Nobody has a crystal ball and market timing is not the boglehead way. This thread is not actionable.
As I explained in an earlier reply, Vanguard's estimates of return probability distributions have nothing to do with market timing. In the reply I just posted, I suggested several actions that one might take based on Vanguard's estimates. You might consider some of them as market timing, but there are possible actions that I don't think that anyone could argue are market timing, such as not abandoning your allocation to international stocks due to their recent under-performance, or even more obviously, increasing your savings rate due to lower than historical expected returns.

Kevin
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Re: Vanguard predicts 10 year equity returns

Post by camillus » Sat Aug 18, 2018 9:15 pm

Thanks, Kevin!

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Re: Predicting the stock market.

Post by FIREchief » Sat Aug 18, 2018 9:19 pm

Taylor Larimore wrote:
Fri Aug 17, 2018 10:16 pm
In my opinion, no one can predict the stock market. We get what the market gives.
Hear! Hear! Great words of wisdom and an educational opportunity for those whose get distracted by shiny new articles written by, or based upon research by, people with a long string of awards, academic titles, etc. Nobody knows nuthin, no matter how "smart" you are.

This Vanguard piece was one of the worst I've seen recently. They didn't even bother to offer any explanation for how they arrived at their knowing of the future. On second thought, maybe that just saved me from wasting some time....
I am not a lawyer, accountant or financial advisor. Any advice or suggestions that I may provide shall be considered for entertainment purposes only.

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Re: Vanguard predicts 10 year equity returns

Post by heyyou » Sat Aug 18, 2018 10:24 pm

With more than a decade of retirement spending in bond funds, at my house, we will be okay for a while. I will wait until later to be concerned. Living within your means does not end on retirement day.

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Re: Vanguard predicts 10 year equity returns

Post by HomerJ » Sun Aug 19, 2018 12:03 am

steve321 wrote:
Sat Aug 18, 2018 7:33 am
so if all experts agree that US will do worse than Int'l over the next 10 years, https://www.morningstar.com/articles/84 ... rns-2.html why are there people here who say you don't need Int'l? (based on last 10 years results I guess)
Here's a fun story from 2014, where "all experts agreed" and were wrong.

https://www.marketwatch.com/story/yes-1 ... 2014-10-21
The J stands for Jay

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Re: Vanguard predicts 10 year equity returns

Post by VaR » Sun Aug 19, 2018 12:21 am

Kevin M wrote:
Sat Aug 18, 2018 8:30 pm
As you showed in the part you quoted, this is what Vanguard calls a central tendency
I know. :)

I'm glad at least you got it.

That said, I think that saying that Vanguard predicts 10-year returns as 3%-4% is deceptive in that it implies to those who don't a priori understand what kinds of "predictions" they might make that they are predicting that returns will fall in the range of 3% to 4%, which is obviously not what they are saying. I mean, first get the percentages right, assuming that the webcast is the definitive source, the central tendency (mean or median we assume) is 3%-5%. Does anyone wonder why they would say that the central tendency is a range? Is it them quoting range of the mean from running different valuation models?

I mean, wouldn't it be more accurate to say that Vanguard "predicts" that there is a 68% probability of annualized market returns for the next 10 years being between -3% and 11%, assuming that they use 6% as the annualization of the 10-year standard deviation for U.S. equities?

But really I'd guess that no one at Vanguard would never say that they were "predicting" market returns within such a narrow band. I doubt they'd ever use the word "predict" because of the implications of that word.

Note: Kevin, your referenced Vanguard economic and market outlook for 2018: Rising risks to the status quo paper was an even better explanation of the underlying Vanguard economic and markets research and analysis. People should just read it instead of the original referenced webcast.

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Re: Vanguard predicts 10 year equity returns

Post by VaR » Sun Aug 19, 2018 12:51 am

steve321 wrote:
Sat Aug 18, 2018 7:33 am
so if all experts agree that US will do worse than Int'l over the next 10 years, https://www.morningstar.com/articles/84 ... rns-2.html why are there people here who say you don't need Int'l? (based on last 10 years results I guess)
Are there *any* experts forecasting that at 100% probability? I don't think so. And I suspect that all the experts who would forecast a higher probability of ex-US outperforming US would say that the forecasts depend on belief in the valuation models and principles underlying those models. In the Vanguard Strategic Research Group's case that is their Vanguard fair-value CAPE model, right?

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