When talking about withdrawals and income, I think the problem often falls apart at the initial assumption of return. If you plug a 20% return into your projections because an investment is currently yielding 20%, then funding a lifestyle suddenly looks very affordable. But how realistic is a 20% long-term return? We don't really know how many investors can achieve it consistently. What we do know is that Warren Buffett averaged roughly 19.7% annually over his career. Buffett is considered one of the greatest investors of all time. That must mean that long term 20% return lands you as the GOAT. I will argue that blossom doent have many Buffets on the platform. So assuming a 20% annual return for decades doesn't seem conservative. It's an assumption that essentially requires you to perform at the level of an extreme outlier. If your retirement plan only works at 15–20% returns then you real plan is to shoot yourself in the foot. that outcome is super unlikely. The lower your return assumption, the more your room a plan has to survive if it beats those expectations. This is really just a long winded warning that yield isnt return and that you shouldn't plan around the yield, but plan around a realistic return instead.
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24 Comments
Mr Financial@mr.financial · 13h
The return buffet has managed is remarkable and stands alone for many reasons, the biggest being the longevity of his returns. It's like an NBA player scoring 30 points in a season. Many players do it all the time. Being a top scorer for 22 year like LeBron James puts him in a category all by himself. Warren buffet has been investing since the 40s... To have that kind of return for 20 years is remarkable. For every dollar he invested in the 40s it's worth 700-800k today. That is extraordinary. There's a reason why other investors stop after 15-25 years... That may never happen again. No reasonable person would plan for retirement using the world's best long term turns... Not even the best current investors in the world. No one can control returns at the end of the day.
Not Financial Advice @anpc86 · 6h
The Buffet comparison also has it's quirks , it's heavily skewed in favor of the early years of investing when you could argue there was opportunities for asymmetric information that would be considered insider trading under the modern era. 2000s was closer to normal investor in single digits and 2010s to present ... Well everyone looking good
Bruce Chun@river6363 · 10h
Fools. He’s trying to be nice. I think we’re due for another 2022. Or a lost decade just to humble a few of you. How did buffet trade not invest throughout the lost decade. I investeded in real estate. Hard assets I could evaluate in a local market I knew which grew way faster than the Stock market.
Brett @birdmanbrett · 14h
Well take into consideration that not many people have been investing that long in the first place for one. Also how many people have publicly tracked portfolios? I would assume that there are certainly people that have had larger all time returns over Buffet. Not downplaying the fact he is the most prolific investor but there is definitely plenty of people who have outperformed that.
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