30-Year Market Forecast For Investment Planning, 2014 Edition

Thirty-Year Estimates of Bonds, Stocks and REITs Assuming a 2.0% Inflation Rate

Asset Classes	Real Return	With 2.0% Inflation	Risk* Estimate
Government-Backed Fixed Income
U.S. Treasury bills (1-month maturity)	0.1	2.1	2.0
10-year U.S. Treasury notes	1.9	3.9	7.0
20-year U.S. Treasury bonds	2.5	4.5	8.0
30-year inflation protected Treasury (TIPS)	2.9	4.9	9.0
GNMA mortgages	2.4	4.4	8.0
10-year tax-free municipal (A rated)	2.0	4.0	7.0
Corporate and Emerging Market Fixed Income
10-year investment-grade corporate (AAA-BBB)	2.6	4.6	9.0
20-year investment-grade corporate (AAA-BBB)	3.3	5.3	10.0
10-year high-yield corporate (BB-B)	4.5	6.5	15.0
Foreign government bonds (unhedged)	2.6	4.6	9.0
U.S. Common Equity and REITs
U.S. large-cap stocks	5.0	7.0	19.0
U.S. small-cap stocks	5.3	7.3	22.0
U.S. small-value stocks	6.0	8.0	26.0
REITs (real estate investment trusts)	5.0	7.0	19.0
International Equity (unhedged)
Developed countries	5.4	7.4	19.0
Developed countries small company	5.7	7.7	22.0
Developed countries small value companies	6.4	8.4	26.0
All emerging markets including frontier countries	7.0	9.0	29.0
Source:  Rick Ferri DYI Comments:  An important point to remember this is for money placed today or stock & bonds held  for the next 30 years to achieve the anticipated return.  Note that the returns for stocks are about 3/4 of the long term return (must be held 30yrs).  100% stocks Historical Risk/Return (1926–2013) Average annual return 10.2% Best year (1933) 54.2% Worst year (1931) –43.1% Years with a loss 25 of 88 Source: Vanguard Anticipated bond returns are slated to achieve returns closer to their long term averages. Historical Risk/Return (1926–2013) Average annual return 5.5% Best year (1982) 32.6% Worst year (1969) –8.1% Years with a loss 14 of 88 Source: Vanguard Before placing dollars at risk it is DYI's opinion you should be paid at least the long term average.  For stocks today high valuation equals poor returns going forward (10yr estimation under 2%).  The Great Wait continues. DYI