Setting sensible expectations for market returns

Setting sensible expectations for market returns

In the world of investing, forming sensible expected returns is crucial for building a strategy and forming a plan for the future. Here are three key points to consider:

⭕𝗗𝗼𝗻’𝘁 𝗿𝗲𝗹𝘆 𝗼𝗻 𝘁𝗵𝗲 𝗲𝘅𝗽𝗲𝗰𝘁𝗲𝗱 𝗮𝘃𝗲𝗿𝗮𝗴𝗲 𝗿𝗲𝘁𝘂𝗿𝗻: Expected returns are not exact figures but the centre of a range of possible outcomes. They serve as a starting point to consider other scenarios. 𝗕̲𝘆̲ ̲𝗱̲𝗲̲𝗳̲𝗶̲𝗻̲𝗶̲𝘁̲𝗶̲𝗼̲𝗻̲,̲ ̲𝟱̲𝟬̲%̲ ̲𝗼̲𝗳̲ ̲𝗼̲𝘂̲𝘁̲𝗰̲𝗼̲𝗺̲𝗲̲𝘀̲ ̲𝗮̲𝗿̲𝗲̲ ̲𝗲̲𝘅̲𝗽̲𝗲̲𝗰̲𝘁̲𝗲̲𝗱̲ ̲𝘁̲𝗼̲ ̲𝗯̲𝗲̲ ̲𝗮̲𝗯̲𝗼̲𝘃̲𝗲̲ ̲𝗼̲𝗿̲ ̲𝗯̲𝗲̲𝗹̲𝗼̲𝘄̲ ̲𝘁̲𝗵̲𝗲̲ ̲𝗲̲𝘅̲𝗽̲𝗲̲𝗰̲𝘁̲𝗲̲𝗱̲ ̲𝗮̲𝘃̲𝗲̲𝗿̲𝗮̲𝗴̲𝗲̲.

⭕𝗠𝗼𝗱𝗲𝗹 𝗳𝗼𝗿 𝘃𝗼𝗹𝗮𝘁𝗶𝗹𝗶𝘁𝘆: Investment returns scarcely follow a straight line. Investing is a game of ‘𝘵𝘩𝘳𝘦𝘦 𝘴𝘵𝘦𝘱𝘴 𝘧𝘰𝘳𝘸𝘢𝘳𝘥, 𝘵𝘸𝘰 𝘴𝘵𝘦𝘱𝘴 𝘣𝘢𝘤𝘬’. Monte Carlo and other tools help to consider this impact on a client’s financial plan.

⭕𝗥𝗲𝘃𝗶𝗲𝘄 𝗮𝘀𝘀𝘂𝗺𝗽𝘁𝗶𝗼𝗻𝘀 𝗽𝗲𝗿𝗶𝗼𝗱𝗶𝗰𝗮𝗹𝗹𝘆: Expected outcomes should be reviewed periodically to ensure they remain reasonable. Investing is not a ‘set and forget’ process.

🗣️ “𝘐𝘵’𝘴 𝘵𝘰𝘶𝘨𝘩 𝘵𝘰 𝘮𝘢𝘬𝘦 𝘱𝘳𝘦𝘥𝘪𝘤𝘵𝘪𝘰𝘯𝘴, 𝘦𝘴𝘱𝘦𝘤𝘪𝘢𝘭𝘭𝘺 𝘢𝘣𝘰𝘶𝘵 𝘵𝘩𝘦 𝘧𝘶𝘵𝘶𝘳𝘦” ~ Yogi Berra

Returns are expected to vary widely around the mean