The Future for Stocks and Bonds? Like The Past. Only Not Nearly As Good
July 5, 2007
Investment pros at Morningstar’s recent annual investment conference seem to be in agreement on one thing: future returns for investors will be a mere fraction of the golden era of the last two decades or so.
'If we are to rely on history as a predictor of future returns, we are likely to be intensely disappointed. Because the future is simply unlikely to be anywhere near the recent or even historical past,' Ranji Nagaswami, chief investment officer of AllianceBernstein Investments, told the conference.
'Bonds are not likely to have returns in double digits. And relative to their long-term history, equities, too, are likely to return a lot less,' she said. AllianceBernstein estimated that in the past two decades, equities returned a compounded 12.5 percent in U.S. dollar terms."
While here at MAXfunds we also have tepid estimates on future stock and bond returns, some of these fund managers motives for setting shareholders expectations so low are suspect. Many of these managers have seen billions of new money hit their hot funds. This makes their job harder, because they have to find more and more compelling investments in which to invest all that cash. The lower the expectations of investors are, the better these managers look when they exceed them – and the less likely those investors are to look for better returns elsewhere. None of these managers, of course, recommended going with a low fee, near zero risk money market fund, of course.
Investment pros at Morningstar’s recent annual investment conference seem to be in agreement on one thing: future returns for investors will be a mere fraction of the golden era of the last two decades or so.
'If we are to rely on history as a predictor of future returns, we are likely to be intensely disappointed. Because the future is simply unlikely to be anywhere near the recent or even historical past,' Ranji Nagaswami, chief investment officer of AllianceBernstein Investments, told the conference.
'Bonds are not likely to have returns in double digits. And relative to their long-term history, equities, too, are likely to return a lot less,' she said. AllianceBernstein estimated that in the past two decades, equities returned a compounded 12.5 percent in U.S. dollar terms."
While here at MAXfunds we also have tepid estimates on future stock and bond returns, some of these fund managers motives for setting shareholders expectations so low are suspect. Many of these managers have seen billions of new money hit their hot funds. This makes their job harder, because they have to find more and more compelling investments in which to invest all that cash. The lower the expectations of investors are, the better these managers look when they exceed them – and the less likely those investors are to look for better returns elsewhere. None of these managers, of course, recommended going with a low fee, near zero risk money market fund, of course.
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