Of course, I'm
assuming bond and stock funds are combined in a diversified portfolio.
Not exact matches
Looking at the past, Vanguard found that those who retired at market peaks with $ 100,000 (adjusted for inflation) in 1928
and 1972 would still have had money in their portfolio at age 100,
assuming a 50 - 50
stock - to -
bond mix
and a 4 % withdrawal rate.
We
assumed that in each period a 30 - year
bond is issued at prevailing interest rates (long - term government
bond plus 1 %)
and that amount is invested for the next 30 years in a portfolio of large - cap
stocks while paying off the
bond as an amortized loan (as if it were a mortgage).
The after - tax proceeds from those sources would be worth $ 547 million if he invested the money in a blend of
stocks,
bonds, hedge funds, commodities
and cash,
assuming a weighted average annual return of 7 percent over the past 15 years, according to the Bloomberg Billionaires Index.
The example, which illustrates a long - term average return on a balanced investment of
stocks and bonds,
assumes a single, after - tax investment of $ 75,000 with a gross annual return of 6 %, taxed at 28 % a year for taxable account assets
and upon withdrawal for tax - deferred annuity assets.
Put simply, even taking account of current interest rate levels,
and even
assuming that
stocks should be priced to deliver commensurately lower long - term returns, we currently estimate that the S&P 500 is about 2.8 times the level at which equities would provide an appropriate risk premium relative to
bonds.
For now, the tool is available only to people whose retirement plans are overseen by BlackRock,
and the projections
assume a retirement portfolio of 40 %
stocks and 60 %
bonds.
Assuming ahealthy business, the lower the PE the more secure the principal
and the more
bond - like the
stock» Andrew Redleaf
You benefit from potential long - term growth
and exposure to the broad
stock and bond markets, while
assuming market risk.
If you
assume that a diversified portfolio of US
Stocks, International
Stocks, Small Capitalization
Stocks,
and some
Bonds will significantly increase returns
and reduce volatility you may be surprised to learn, that recently the
stock funds are quite highly correlated.
They
assume round - trip rebalancing frictions of 0.15 % (0.10 % for
stocks and 0.05 % for
bonds).
For testing, they
assume: (1) a simple 60 % -40 %
stocks -
bonds portfolio; (2)
bond returns are small compared to
stock returns (so only the
stock allocation requires rebalancing);
and, (3) option settlement via share transfer, as for SPDR S&P 500 (SPY) as the
stock / option positions.
Anxious to earn their
assumed returns of 7 to 8 percent a year, pension funds across the country have been pushing more money into alternatives instead of traditional
stocks and bonds.
As capital moves freely, investing in production or in fictitious forms of capitalism,
and as speculators, financier capitalists,
stock and bond traders, investment bankers, hedge fund mangers,
and others help to unleash the forces of capital accumulation globally,
and as neo-liberalism with its aggressive pro-market state policies allows this finance capital to restructure itself, to diversify its forms, to expand its accumulation opportunities through the growth of retail, financial
and service industries,
and enhance its global reach, then it is safe to
assume that our ecosystems have been harnessed exploitatively in a system of capitalist commodity production such that we can not talk about capitalism at all without talking about capitalism as a world ecology.
Finding the right mix of asset classes, like
stocks and bonds, goes a long way in determining what kind of growth you can expect
and how much risk you're
assuming in your portfolio.
I would
assume that a dividend investor would keep their equity positions
and live of the distributions without needing to sell the
stock for
bonds.
For example, a 65 year - old with a $ 1 million nest egg split equally between
stocks and bonds who wants an 80 % chance that his savings will sustain him for at least 30 years would have to limit himself to an initial draw (that would subsequently rise with inflation) of just under 3.5 %, or a bit less than $ 35,000,
assuming annual expenses of 1.5 %.
For example, from the market's high in October 2007 to its low in March 2009, a portfolio with 90 % in
stocks and 10 % in
bonds would have lost about 45 % of its value compared with a 29 % loss for a 60 - 40
stocks -
bonds mix (
assuming no rebalancing).
Let's
assume a portfolio of 100 %
stocks will return 6 %,
and a portfolio of 100 %
bonds will return 3 % on an annualized basis.
Given that you have 13 years before retirement, your best bet is to invest in a mix of
stock and bond index funds (
assuming you are comfortable with market flucutations).
So
assuming you have a balanced portfolio composed of roughly half
stocks and half
bonds, you can count on your holdings to produce no more than 9 % a year.
But if you follow the strategy I mentioned above
and put only a portion of your savings into an annuity
and invest the remainder in a portfolio of
stock and bond funds, you would still have assets that you could pass along to your heirs,
assuming you manage withdrawals from your portfolio so you don't deplete it too soon.
Let's further
assume this couple also has $ 1 million in savings invested in a 50 - 50 mix of
stock and bond index funds
and that they require about 85 % of pre-retirement their income, or $ 85,000, to maintain their standard of living.
But if you stick to the same scenario as above but
assume that
stocks and bonds are projected to gain just 7 %
and 4 % annually, you have an 80 % - or - so chance that your savings will last 30 years or more.
I
assume I would then have to declare a capital gain or loss on my 2012 year taxes on the
stocks and bonds based on the valuation of the assets on the day of the transfer.
The example, which illustrates a long - term average return on a balanced investment of
stocks and bonds,
assumes a single, after - tax investment of $ 75,000 with a gross annual return of 6 %, taxed at 28 % a year for taxable account assets
and upon withdrawal for tax - deferred annuity assets.
Keep in mind that the 4 percent rule — or 3.5 percent rule, in this case —
assumes an even mix of
stocks and bonds.
Assume the next year,
stocks and bonds soar while real estate
and gold depreciate significantly.
Our Humble Opinion: While a globally diversified
stock portfolio might return 6 % a year over the next decade,
bond investors probably shouldn't expect to earn much above 3 % —
and that
assumes you lean toward corporate
bonds and hence take a moderate amount of credit risk.
Assuming 2 % yearly inflation, he estimates
stocks and bonds will deliver annualized gains of roughly 7 %
and 4 % respectively over the next few decades.
Hereâ $ ™ s an example:
assume you have decided on an asset allocation for your portfolio of 50 %
stocks and 50 %
bonds and cash.
Investors have a choice between
stocks and bonds,
and the Fed model
assumes that if the yield on
bonds is higher than the yield on
stocks, investors will sell
stocks and buy
bonds until the yields converge,
and vice versa.
If companies
assumed their pension assets (which includes a mix of both
stocks and bonds) would grow at 6 percent,
and not the highly optimistic 9.5 percent they are currently forecasting, $ 8 more of earnings would be subtracted.
You could sell
bonds while they are high (
assuming they keep their value in during that crash)
and buy
stocks when they are low.
I
assume that the formula will take the dividend yields of
stock and the yield of
bonds in to account (not sure if there are any other components).
Throw in the fact that you are starting to fund an IRA at a time when some experts are predicting subpar returns — for example, ETF guru Rick Ferri has forecast a 7 % annual long - term return for
stocks and roughly 4 % for Treasury
bonds,
assuming 2 % inflation —
and I think it's fair to say that this isn't a goal you should expect to reach quickly.
For example, let's
assume that at the end of 2007, you had 80 % of your portfolio invested in
stocks and 20 % in
bonds.
He
assumed annual expenses of 10 basis points for a passive
stock portfolio
and 10 basis points for a passive
bond portfolio.
Let's
assume you
and your wife are 66
and 63 years old respectively, have $ 1 million invested in a 50 - 50 mix of
stocks and bonds and that you want a high level of assurance that your savings will support you for the next 30 years.
The examples I've used here
assume stocks,
bonds,
and gold return a stead annual average.
Investment adviser
and ETF guru Rick Ferri's recently released long - term forecast for
stock and bond returns estimates annualized returns over the next few decades will come in at 7 % or so for large - company
stocks and 4 % or so for 10 - year Treasury
bonds,
assuming 2 % inflation.
Once the mortgage is paid off, they invest the $ 2,533 former payment each month in a globally diversified mutual fund invested in 50 %
stocks and 50 %
bonds with an
assumed average annual rate of return of 6 %.
In the examples below we've
assumed a traditional balance of 40 %
bonds and 60 % equities, with equal amounts in Canadian, U.S.
and international
stocks.
If we
assume you earn, say, a steady 5 % annual return on your mix of
stocks and bonds, you could draw $ 645 a month, or $ 100 a more a month than the annuity pays,
and your stash would until about age 85.
It does instead
assume you will have a relatively balanced portfolio of
stocks and bonds in order to generate the income necessary to pay your inflation adjusted living expenses over a relatively long time horizon.
Let's
assume that you have invested some serious time
and effort in research of major
stock market indices covering
stocks,
bonds, commodities
and real estate
and have the best ETFs identified.
This rule of thumb
assumes a 50/50 mix of
stocks and bonds held throughout a retirement lasting 30 years,
and is based on the historical performance of US
stocks and bonds since 1926.
But we
assume bonds are safe,
and yet some
bonds are almost as risky as
stocks.
It also
assumes the retiree has saved for 30 years, needs retirement income for 30 years,
and maintains an asset allocation of 60 %
stocks and 40 %
bonds.
(buy low
and hope it goes up later) We do have a very odd assortment of funds in my 401K... they do offer the VG target funds though, so I
assume they figure if you want VG total
stock / total
bond / total intl you can just invest in one of those.