John Mauldin tackled a reader question about what to do for a ten year investment horizon. Mauldin seemed surprised that the person really only had a ten year horizon and offered little hope for that time period but he is more optimistic for anyone with a time horizon of 20 years or longer.
There is a good chance that someone who thinks they only have a ten year time horizon is wrong. Ten years to retirement is not a ten year time horizon. It is possible that in ten years, upon retirement, there would need to be big changes in an investment portfolio but that is not a ten year time horizon.
On a somewhat related note the Barron's cover story was about emerging markets. While not terribly insightful there were a couple of useful nuggets but no mention of Chile which is probably a good thing. If Mauldin is correct about US equity returns then to tie in a point I have been making for years investors have to figure out how to research foreign markets and figure out what is the best way for them to access those markets. I imagine for a growing number of folks that will mean ETFs but even mediocre actively managed funds would probably outperform the US market that Mauldin envisions for the next few years.
There was one little snippet from Mauldin that baffled me;
For most of you, caution is appropriate. Do not plan to make 8% a year from your portfolio, or to spend 7% of your savings. As Ed Easterling has shown, there are historical periods where people taking 5% a year from their portfolios would be left with nothing after 30 years.
Has any part of the industry ever thought an 8% withdrawal rate was appropriate? Ditto 7%. Maybe in the realm of "exclusive investment products" these sorts of withdrawal rates exist but not being privy to those, 7% is crazy let alone 8%. We've covered this ground before about people spending too much and while this problem is not going to go away I would take the opportunity to learn from this mistake that other people will make.
Short post, very busy weekend.