3 ms·
Guaranteed 8% rate of return, let alone %12, violates historical data/mathematics. Anyone other than Renaissance Technologies advertising as much needs to be su
by aswanson 10y ago
Guaranteed 8% rate of return, let alone %12, violates historical data/mathematics. Anyone other than Renaissance Technologies advertising as much needs to be sued.
- vkou 10y agoThe average rate of inflation through the 80s was 5.6% Given that, an expected 8% rate of return isn't unreasonable.
- AstralStorm 10y agoHistoric data is not good enough to base a long term policy on. Not without precise risk valuation at least.
- vkou 10y agoNo, but it generally makes sense to talk about expected investment return over the rate of inflation. Hence, the raw number is meaningless - a 12% return rate in an environment with inflation of 9% is almost as reasonable as a 3% return rate in an environment with inflation of 0%.
- neffy 10y agoThat's one of several things to bear in mind - but it's not a straightforward one - the various causes of high inflation tend to mitigate against matching investment rates. Leaving that aside - even at the time it seemed ridiculous - so learning 20 years later that the "professionals" involved have essentially bet everybody's future, on projecting those kinds of returns for 40 years... ... because we all understand I hope. When this thing blows up - its not going to be pretty.
- aswanson 10y agoThat implies a 2.4 percent rate of real growth in a hyperinflationary era, so assume a 4.4 real rate of return in normal circumstances. That is the number we should be basing projections on, as it correlates more closely to real dollars in the retirement age years. 8-12 percent estimates are bs, and red herrings because they don't relate real returns.