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Setting RoR Expectations

They say Happiness = Reality minus Expectations. If that's true, then low expectations for everything you can't control must be a key to happiness. Most of us already understand the importance of realistically anchoring client's expectations for portfolio returns. The bigger question: If we want to make good on the "under-promise, over-deliver" mantra, then what kinds of return expectations should we establish.


We have a tool that provides a clue: The Historical Analytics Tool powered by IncomeConductor. Let's say we have a bucket of money that has a 25-year time horizon and is invested 80% equities. What are the odds that we'll achieve an average 6% rate of return? 97%. How about a 7% rate of return? 67%. Seems a lot safer to use 6% as our base assumption.



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