With U.S. stocks at all-time highs, it’s more important than ever that investors be brutally realistic about future returns.
Some of the most purportedly sophisticated investors in the world, the managers of giant pension funds for state and local government employees, might not have absorbed that lesson yet. You can learn a lot from these folks — if you listen to them and then do the opposite….
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This article was originally published on The Wall Street Journal.
Further reading
Jason Zweig, Your Money and Your Brain
Jason Zweig, The Devil’s Financial Dictionary
Benjamin Graham, The Intelligent Investor
Aleksandar Andonov and Joshua Rauh, “The Return Expectations of Institutional Investors” (SSRN.com)
“Future U.S. Equity Returns: A Best-Case Upper Limit” (PhilosophicalEconomics.com)
Public Plan Investment Return Assumptions (National Association of State Retirement Administrators)
Warren Buffett, “Mr. Buffett on the Stock Market,” Fortune, Nov. 22, 1999
John C. Bogle and Michael W. Nolan, Jr., “Occam’s Razor Redux: Establishing Reasonable Expectations for Financial Market Returns“
William J. Bernstein, “What Rate of Return Can You Reasonably Expect…?” (EfficientFrontier.com)
William J. Bernstein, “What’s Expected? What’s Cheap?” (EfficientFrontier.com)