# What do you consider a reasonable annual return for?



## cannew (Jun 19, 2011)

GIC’s? currently offer: 1.5% 1 yr, 2% 2 yr, 2.3% 3yr, 2.6% 4yr, 2.8% 5yr (averages). I have some 4%+ and won't buy more except for savings.

Bonds? I don’t invest in bonds.

Stocks? My goal is 10% which includes dividends ( I won’t buy unless it pays a dividend and has a history of increasing it).

ETF’s? I don’t invest in ETF’s.


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## Belguy (May 24, 2010)

7 percent in a balanced portfolio in this day and age.


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## CanadianCapitalist (Mar 31, 2009)

10% total returns from stocks is a bit of a stretch. TSX is trading around 13,000 and will earn approx. $750 this year. Dividends will likely amount to $340. 

Assuming p/e doesn't change much (this is a huge assumption because the current p/e of 17 looks a bit on the high side) and earnings growth of 4 to 6 percent, we can estimate that TSX expected earnings will be in the range of 6.5 to 8.5 percent over the next decade in nominal dollars.

An investor with a traditional 60/40 split between stocks and bonds can reasonably expect to earn about 6%. From today's levels, portfolio returns are likely to be very modest. Don't shoot me; I'm just the messenger.


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## Ethan (Aug 8, 2010)

CanadianCapitalist said:


> 10% total returns from stocks is a bit of a stretch. TSX is trading around 13,000 and will earn approx. $750 this year. Dividends will likely amount to $340.
> 
> Assuming p/e doesn't change much (this is a huge assumption because the current p/e of 17 looks a bit on the high side) and earnings growth of 4 to 6 percent, we can estimate that TSX expected earnings will be in the range of 6.5 to 8.5 percent over the next decade in nominal dollars.
> 
> An investor with a traditional 60/40 split between stocks and bonds can reasonably expect to earn about 6%. From today's levels, portfolio returns are likely to be very modest. Don't shoot me; I'm just the messenger.


Where are you getting these stats on the TSX from?


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## CanadianCapitalist (Mar 31, 2009)

Trailing p/e and annualized dividend yields can be obtained from this page:

http://www.tmxmoney.com/HttpControl...change=T&SelectedTab=QuoteResults&Language=en

Analyst estimates for FY2011, IIRC, is around $900. But these numbers are frequently revised and my guess is as good as yours.


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## gibor365 (Apr 1, 2011)

If my return will beat inflation rate - it's already will be good.


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## ddkay (Nov 20, 2010)

The Bloomberg mobile app has P/E ratio for indices although it shows different than the number CanadianCapitalist posted:










It's also different than the number on tmxmoney.com


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## CanadianCapitalist (Mar 31, 2009)

ddkay said:


> The Bloomberg mobile app has P/E ratio for indices although it shows different than the number CanadianCapitalist posted:


Bloomberg ttm earnings = $697.45

TSX website ttm earning = $681.98

Pretty close I would say.


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## Belguy (May 24, 2010)

I have just lowered my projected target to 6 per cent!!


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## ddkay (Nov 20, 2010)

Yup it is pretty close. Where did you get those ttm earnings numbers? Also is there anywhere that shows historical P/E? What's a normal number for the TSX Composite?


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## Jon202 (Apr 14, 2009)

many pension plans use a 10yr annualized return of 6 or 6.25% with inflation at 2%.


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## CanadianCapitalist (Mar 31, 2009)

ddkay said:


> Yup it is pretty close. Where did you get those ttm earnings numbers? Also is there anywhere that shows historical P/E? What's a normal number for the TSX Composite?


p/e is price/earnings. If you have the ratio and price, it is trivial to derive "e".

I don't have a ready source for average p/e of the TSX Composite. It might be a good idea to put together a source like the one Shiller maintains for the S&P 500.


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## cannon_fodder (Apr 3, 2009)

cannew said:


> GIC’s? currently offer: 1.5% 1 yr, 2% 2 yr, 2.3% 3yr, 2.6% 4yr, 2.8% 5yr (averages). I have some 4%+ and won't buy more except for savings.
> 
> Bonds? I don’t invest in bonds.
> 
> ...


Using a combination of leveraged ETFs and options, I'm running at 45% annually but with recent changes to my strategy I'm targetting 10% a month. Even though I'm running at 40% a month, it is far too early to say this new strategy can consistently generate even the 10% per month.

For "stocks", I would not use more than 8% annually but that factors the types of stocks I own.


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## Abha (Jun 26, 2011)

cannon_fodder said:


> Using a combination of leveraged ETFs and options, I'm running at 45% annually but with recent changes to my strategy I'm targetting 10% a month. Even though I'm running at 40% a month, it is far too early to say this new strategy can consistently generate even the 10% per month.
> 
> For "stocks", I would not use more than 8% annually but that factors the types of stocks I own.


Can you elaborate on your strategy of using leveraged ETF's. How do you manage risk given that some of those ETF's are 2 or 3 times leveraged?

Do you do this with your whole portfolio or are you investing with a small portion of your capital?

Thanks in advance,


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## humble_pie (Jun 7, 2009)

fodder there's not a cboe pit trader alive or dead with option returns like you're boasting. Something has to be wrong with you accounting.

even myron scholes of black scholes merton fame never made such a claim. Not before he took down Long Term Capital. Certainly not after.

here in this forum, less than 2 years ago, you said you had never traded an option in your life & you said you could not understand them. Your questions are all in the archives. You used to ask members of this forum to tell you which option you should buy or sell.

at the time, i thought your questions were troubling because option traders need to have a knack for it. They need to be able to figure things out for themselves at lightning speed. Any i've known possess this knack.

so if you're claiming now that you've gone from this stumbling, inauspicious beginning to earning 40% return a month in less than 2 years, wow, this is Challenger rocket liftoff. Never before seen on this planet. Perhaps one should inform the Guinness book of world records ?


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## SixesAndSevens (Dec 4, 2009)

I am honestly surprised at everyone here's low expectations.
6% - 7% annual returns, seriously guys?
why bother i mean. just buy GICs and negotiate the best rate. you will come pretty close.
with 6% to 7% returns you can't retire before 65 guaranteed.
you are barely 2% above inflation at that rate.

i shoot for minimum of 20% annual returns.
on some rare trades I might exit with 15% if it starts to go against me.
but my target is 20% min.

I only invest in individual stocks, no bonds, some options that I can manage on my own but it's rare.

my philosophy is black swan based investing.
i only trade when there is clear and present danger and the fear in the market is palpable.
so when there is deep fear and correction in one sector or overall market.

when the market tanked in Oct '08 I went all out.
i liquidated all my mutual funds even though most of them were in the red already.
then i picked individual stocks like some of the banks.
in less than 3 years, most of the bank stocks like BMO BNS have doubled so my return is > 100% in less than 3 years.
that is what I am talking about.

last set of trades I made was in March of 2009 and nothing after that and in all of 2010 i made like maybe 2 trades.

after the earthquake in japan I went all out and bought anything linked to Japan like the Nikkei index the uranium stocks and the japanese car stocks.
some of you may remmeber i posted about it at that time.
I was all done by first week of April.
no trades since then.

now i'm just gonna watch this European mess unfold and if everything crashes and burns there i might buy.

do I lose money? of course. in some trades i have lost > 30% when things haven't worked out.
but on the ones that work out i make 100% or more.
and i only trade when there is some deep deep event happening that creates an opportunity.
so sometimes months and even years may go by like between March 2009 and March 2011.

but sheesh 6% annual expectations


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## Argonaut (Dec 7, 2010)

Some of these claims are getting pretty funky. I just bought some old silver coins today from a guy for face value.. does that mean I'm making like 1,000,000% annually? Haha. Good investing comes and goes, 7.2% annually is a good bet to double your money every 10 years. Anything above that is gravy.


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## ddkay (Nov 20, 2010)

SixesAndSevens: Where did you negotiate a 6% annual return GIC?


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## humble_pie (Jun 7, 2009)

funky delicious. And did i tell you bout the one where i collect 8 grand for 20 minutes work in an iron condor in ... oh, never mind.


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## Abha (Jun 26, 2011)

@SixesAndSevens

You're essentially gambling in the aftermath of Black Swan events. (Financial Crisis of 08, Japanese Tsunami etc.)

You could just as easily lose your principle with a couple of bad bets. That being said, congratulations on your results so far but I hardly think this should be the approach of the vast majority of the people on here. 

Far too risky in my opinion.


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## cannon_fodder (Apr 3, 2009)

Abha - I've concentrated on HNU/HND which are Horizon BetaPro ETFs dealing with Natural Gas. I use a very substantial portion of our portfolio as I've become more confident in my knowledge of them. The options portion has represented only 3% of capital deployed in this strategy.

Humble Pie - actually I never claimed I was getting a return of 40% on options. That is for the entire strategy. For options it is higher and considering if I had held longer it would be greater still it doesn't seem like boasting to me. I do remember the email exchanges we had and your new words make me think that I shouldn't count on continued success. It's always welcome to get a bucket of cold water thrown at me, a neophyte, to temper my expectations.

Now, granted, these are gross returns - no commissions included. I generally have only held them for 1-3 weeks and I haven't done any annualized return calculations on the options since it is irrelevant to me. Only my overall returns on the new strategy and, even more importantly, absolute $ returns. Here are the recent trades just on options and then you can point out my errors in computation:

Security Date Buy Sell
HNU Option	4/6/2011 $0.350 $0.600 
HNU Option	5/5/2011 $0.650 $1.600 
HNU Option 5/9/2011 $0.600 $0.900 
HNU Option	5/12/2011 $0.600 $0.900 
HNU Option	5/13/2011 $0.600 $0.850 

Now the results of my new strategy:
HNU Option	5/27/2011 $0.473 $0.900 
HNU Option	5/27/2011 $0.450 $0.900 
HND Option	5/27/2011 $0.350 $0.700 
HND Option	5/31/2011 $0.367 $0.850 
HND Option	5/31/2011 $0.350 $0.900 
HND Option	6/15/2011 $0.250 $0.700 
HND Option	6/16/2011 $0.250 $0.850 
HND Option	6/16/2011 $0.350 $0.850 
HND Option	6/16/2011 $0.350 $0.850

I should point out I don't use options like I understand the professionals do. I don't sell anything to open a position. For the most part, I'm buying calls (I've dabbled with buying puts but the volume on these options is quite low and for puts even lower) to open positions.


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## SixesAndSevens (Dec 4, 2009)

*@ddkay :* SixesAndSevens: Where did you negotiate a 6% annual return GIC?[/QUOTE]I didn't say i can get a 6% GIC today.
I said you can negotiate the best rate and come pretty close to 6%.
3% for 5 yrs. is the going rate i am given to understand.
if your RRSP amount is bigger say $50K or more you might be able to squeeze another 50 beeps from your bank.
so if the results of your stock investing is 6% at best then your risk spread is barely 2%.
inflation is running over 2% anyway.
imho, not worth the risk-reward ratio to invest in equities these days unless you are targeting well above 10%.

*@Argonaut : * i didn't say i make 1,000% on every trade.
only that i have made > 100% on the financial stocks.
i'm sure i'm not the only one.
many bought bank stocks in the aftermath of the financial crisis and have done well.
the difference i suppose is that i went all out instead of gingerly.

*@ Abha :* yes i'm playing the aftermath of black swan events but it is not gambling. far from it.
i won't lose all my portfolio because i dont put my entire portfolio in stocks in the first place.
which is why my total returns target is only 20% and not 40% or more.
as i said i sometimes lose > 30% on such moves.
but the ones that work out yield me 100% or so.
because of that reason my target is in the 20% range.

it is noted also that 20% is well below what some seasoned investors earn like Joel Greenblatt, Peter Schiff, Chris Browne and so on.
not to even mention Buffet.


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## Homerhomer (Oct 18, 2010)

Warren Buffet is an investment genius and has been able to achieve 22% over a long period of time.

I think the goals of achieving 20% year in and year out are a bit of a strech for most investors, especially given the fact you only invest part of your portfolio in equities and do very little trading apart from times of crisis (I gather you are then holding cash most of the time which earns little return), last 3 years are not that common, you got lucky, please come back in 10 or 15 years and tell us that you are still doing 20% each year.

I hope you can do it, but I doubt it.


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## kcowan (Jul 1, 2010)

I agree that the returns since March 2009 are not typical. Anyone expecting that to happen every three to five years is going to be disappointed. The point about retirment planning is too pick a target that is achievable. It is fine to aim for higher. But relying on higher might end in disappointment.


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## SixesAndSevens (Dec 4, 2009)

yes i sit in cash at other times but it doesn't earn 0 returns.
it is either in GICs or high interest accounts.
when i see deep opportunity like i mentioned i cash it and go all in.
in the last 5 years there have been only two such opportunities. the financial crisis and the japanese earthquake.
going back further to about 10 years there was one other opportunity in 2001, in the months after 9.11
that was a perfect storm of dot com bust in May 2000 and the terrorist attacks.
other than that i havent traded much.

i don;t believe in all this dollar cost averaging, monthly investment plan, drip plans and spp plans.
it all turns out average results and more often 0% growth after accounting for inflation and part of prtfolio underperfoming the rest.

buffet's returns were much better than 22% most of the time.
at one point in the 80s he was avergaing over 40%.
the reason his returns fell back to the 20% range was because he chose cash flow over growth and he started playing defensively (on advice from Munger).
he was also managing an ever increasing portfolio of insurance and there reliability of cash flow is more important and not 40% growth.
had he continued his own strategy i'm sure his average today would have been 40%. at least

of course it is entirely possible i won't get 20% or more over many years.
but no hard in trying.
if it doesn't work out i'll at least have the 6% that most are targeting.


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## Homerhomer (Oct 18, 2010)

In such case are your real returns 20% annually since 2000? If so you are doing great, hope you can keep it up.


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## humble_pie (Jun 7, 2009)

i for one don't believe that mega opportunities like the collapse of 2008-09 present themselves every 3 to 5 years. They are rather more once-in-a-lifetime events.

ottomh i believe that a large opportunity might beckon every decade or so.

i do agree w 6s&7s that the prior large was way back at the beginning of the previous decade. However i think the japanese earthquake had only mild downward effect that does not count as a major market bust. And i don't imagine that 6s is doing too well with his post-fukushima uraniums or nippon cars, either.

it's interesting how conflicting views can each have total merit, proving there are many ways to skin the cat. 6s&7s rubs a funny bone when he says pifphooey on all this dollar cost averaging, monthly investment plan, drip plans and spp plans. I mean, we were all waiting for somebody to puncture the hot air, right. Need a laugh break in the middle of what can be fairly pious preachifying, right.

but at the same time the folks who are diligently & responsibly saving, dripping, dcaing & spping are the ones who are going to come out ahead, everybody knows that.


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## SixesAndSevens (Dec 4, 2009)

the simple reason I believe all this dca and drip and spp and monthly plans don't work is because it always reverts back to average returns.
it's created by the financial advisors and bank advisors to lock in your monthly contribution and your MER.
it builds a source of revenue for them and not for us.
i did that dog and pony dance for many years before going out on my own.
I'm never looking back.

the aftermath of japan didn't create the full blown crisis i was thinking of, so some miscalculation on my part.
and yes the nuclear and auto stocks are sucking big time now.
but that's the whole point.
unless there is deep deep fear there is very little upside later.

*@Homerhomer :* i'm around 18% right now from 2000 until now.
i would have been over 20% but for my bet on the nuclear and auto stocks related to Japanese earthquake.
if those start coming back during sometime next year I should be back on track.


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## humble_pie (Jun 7, 2009)

since you are only active a couple of times a decade & since the last big bet occurred only months ago when you played fukushima but it hasn't worked out yet, i take it we shall have the pleasure of your company for a while longer ?


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## andrewf (Mar 1, 2010)

I think everyone should be able to achieve above average investment returns. I see no contradiction whatsoever.


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## SixesAndSevens (Dec 4, 2009)

*@ humble pie :* i don't post here often but try to read once a week if possible. i will be here until i score enough to kick all this and retire.
if not then I guess it will be until I'm 65 like everyone else and then retire.

*@ andrewf : * everyone cannot score above average returns. else it won't be an average anymore will it?
i'm sure you know that. you show as Senior Member so you must be a seasoned investor and you have nearly 2,000 posts so you must spend a lot of time here 
someone has to score below average returns for it to be average.
it is nearly impossible to tell what is the average return investors are scoring.
I use 20% purely for my _personal_ projections.
by my calculations if I score 20% annual or more I will have enough to retire in about 10 years. i already take into account govt. benefits eligible after 65.

i don't care if the rest of the market scores more than 20% for the next 10 years but i seriously doubt it will happen. it's never happened before in 100 years except maybe one or two years like 1999.


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## andrewf (Mar 1, 2010)

Either my deadpan is too good or not good enough. You tell me.


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## MoneyGal (Apr 24, 2009)

You forgot to add the <sarcasm> and </sarcasm> tags.


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## andrewf (Mar 1, 2010)

I added the second sentence to make it more obvious, but apparently it was insufficient.


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## blin10 (Jun 27, 2011)

that's a terrible tactic to go all in... it also depends how much you went all in with, going all in with 1k or 10k is nothing, but going all in with 100k+ that's a sure way to loose a lot of money... if you went all in with 100k+ in that uncertain time with a bank stock, more power to you, but you also could of lost it all... it was more of a gamble and you won rather then smart investment



SixesAndSevens said:


> yes i sit in cash at other times but it doesn't earn 0 returns.
> it is either in GICs or high interest accounts.
> when i see deep opportunity like i mentioned i cash it and go all in.
> in the last 5 years there have been only two such opportunities. the financial crisis and the japanese earthquake.
> ...


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## peterk (May 16, 2010)

I think most of us got it andrew.

Whenever I get it in my head that I think I should be trading instead holding, or that I can significantly beat the market, I bring up this picture to remind me what I'm up against. http://graphics8.nytimes.com/images/2011/06/08/nyregion/08ubs-cityroom/08ubs-cityroom-blog480.jpg


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## marina628 (Dec 14, 2010)

I am up 14.4% in 2011 ,I cashed out all my Precious Metals earlier in the year for a 30% + return which was 20% of my portfolio and I made 9.4% off a quick buy and sell of SLB-N. I set my expectation to a low 5% so if i get anything over that it is a bonus.


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## daddybigbucks (Jan 30, 2011)

marina628 said:


> I am up 14.4% in 2011 ,I cashed out all my Precious Metals earlier in the year for a 30% + return which was 20% of my portfolio and I made 9.4% off a quick buy and sell of SLB-N. I set my expectation to a low 5% so if i get anything over that it is a bonus.


Im the opposite. I set my expection at 15% each year on the deadline of March 31.

If i dont make it on capital gains, i have to fork over savings to make up the difference.

Since i started doing this, i have only missed on year -2009.


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## jwsmith519 (Dec 13, 2009)

daddybigbucks said:


> Im the opposite. I set my expection at 15% each year on the deadline of March 31.
> 
> If i dont make it on capital gains, i have to fork over savings to make up the difference.
> 
> Since i started doing this, i have only missed on year -2009.


This is a good strategy, except for two things. Consider this for long term investing (10+ years)

#1 - Early on, you need to have a tremendous amount of cash to keep the returns going. Once the markets get going, all or nearly all of your returns will be straight from market appreciation, so you won't be making any contributions. You could go for many years or even a decade without making a contribution.

#2 - This strategy requires long-term monitoring. I don't think most people have the long term focus to monitor their market values to keep things going.

I've backtested this strategy using over 30 years of data, so that's why I know if it would work or not. For me, the fact that could go for years without making a contribution is a deal breaker. At the end of the day, I want to go into retirement knowing I got things for cheap. So I stick with DCA, cause you don't miss a contribution.

Where does your strategy work? I think it would work if you're time horizon is 2-5 years out, and you're saving for a trip, vacation, home renos or a boat or some other asset.


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## Belguy (May 24, 2010)

I have decided that a reasonable return for me this year is anything in positive territory. So far, not so good!!!


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