Some interesting comments in there. Most interesting that the author says you can’t rely on historical returns, then relies heavily on historical data.lazyday wrote: ↑Thu Aug 15, 2019 5:38 amHere's a counterargument: http://www.efficientfrontier.com/ef/403/fairy.htm
I think what is missing from that analysis is he assumes that future returns (actual $ in terms of dividends, etc) are known and fixed. When in fact they are not. That is where the risk comes in.
I’ll add to my point above. In addition to risk profiles, is there something to suggest that the broad market is expected to have lower profitability? Lower dividend rates? A different capital structure?
Money finds risk. If there are low risk, low return assets out there, something will rise up that is high-risk, possibly high-reward and drive the market (think FANG in the last decade).
I think picking two exact points in time could very well see a 0% or even negative return. But I don’t have any evidence to suggest that the future will be dramatically different as it apples to the risk profile of a basket of equities more the risk tolerance of investors. Nor do I think future profit levels will be somehow diminished across the board.
I’ll stick to the fact that returns will still run nominal 7-8% +/- 4%.