Bull markets tend to inflate investors' expectations. Since January 1, 2009 to September 30, 2017 the Vanguard 500 Index fund (VFINX) has returned 14.29% annualized while the Vanguard Balanced Fund (VBINX) 10.39%. Higher returns if you use the March 2009 bottom - 18.61% and 12.95%.

@Maurice, I think that is a solid intoduction class to those who are start to invest for their 401(k) and others. Afterward the students still need to further their learning by using a number of excellent books recommended on MFO. So, your posting is highly valuable to everyone here.

Just looking at the figures in the excerpt Ted quoted, my reaction was: what are these people smoking?
The historical real return of the US large cap market over the last century has been 7%. Depending on your source, bonds (10 year Treasuries) have returned between 2% and 6% less than stocks.

Good to see someone who also had the exactly question of 8.9% real return above inflation as I did.

In addition, I looked through my stack of funds; and, I have two that bettered the 8.9% objective over a ten year period. They were FDSAX and SPECX. However, remember the 2007 and 2008 returns from the Great Recession that brought the average down will soon be coming off at the end of next year. My broker has the thinking that a balanced portfolio will return somewhere between 6% to 8% on average over the next ten year period depending on it's equity allocation and positioning. He is not looking for great things from bonds.
I think what the article was trying to establish is that market returns are not going to meat investor expectations.
I wish all ... "Good Investing."
Old_Skeet

I can't quite tell if you're talking nominal or real rate of return. Supposedly (though I have my doubts as noted above) the 8.9% objective is real return.
Using the BLS figures here for annual CPI-U (inflation) annual amounts for the 10 past July's, I computed a cumulative inflation of 18.07% over the past decade.
M* reports that $10K invested in FDSAX a decade ago would be worth $25,064 today, in nominal dollars. Adjusting for inflation (dividing by 1.18066) gives a real value of $21,229. Annualized, that $10K grew at a rate of 7.82%/year to become $21,229 in real dollars. Still terrific, but not quite 8.9% real return.
While 2008 will soon drop off the 10 year chart, that won't magically make your expected returns better, at least if you're looking long term. No more so than 2000-2002 dropping off the 5 year chart helped investors when 2008 came along. Bears will still come along sooner or later, you just don't know when. Looking at bull market data alone is IMHO misleading.
Not trying to be a wet blanket here, just trying to be, from my perspective, realistic. An aging population suggests slower growth, as does the fact that companies are hoarding cash (rather than putting the money to work).

Hi @Tony,
Thanks for the tip. It's much appreciated.
I'm not a trader but I still have the $2.00 bill that Ed Seykota sent me years back when I joined the tribe. "If I miss a set-up I await the next." Perhaps, it is time for me to revisit my spiff investing theme and 5,1 it.
Please keep posting.
Old_Skeet

Here's the full Natixis 2017 global survey report:
http://durableportfolios.com/global/understanding-investors/2017-global-survey-of-individual-investors-retirement-report
and the full Natixis press release on the US slice of that survey:
https://ngam.natixis.com/us/resources/2017-global-individual-investor-survey-press-release
(note that the table at the bottom of that US press release is global data, not data limited to US participants)
Just looking at the figures in the excerpt Ted quoted, my reaction was: what are these people smoking?
The historical real return of the US large cap market over the last century has been 7%. Depending on your source, bonds (10 year Treasuries) have returned between 2% and 6% less than stocks.
[See the stock link above: risk premium of stocks over bonds of 6%, historical nominal bond return of 5% with inflation average of 2%-3%, or simply the difference in nominal returns of stocks and bonds, which has been 2% or greater over the past 90 years.]
So even if the markets produce average real returns going forward (not expected over the next decade), you'd need a very aggressive (nearly all stock) portfolio to get to the 5.9% real return that advisors are supposedly predicting. (The 5.9%/advisors and 8.9%/investors figures are not in the Natixis releases, so they must come from the full survey.)
The FA Mag article says that there's a disconnect (51% difference) between investors and advisors, based on these two figures. If there is this disconnect, what does that say about the job that advisors are doing in educating and guiding their clients?
But there is another possibility. Investors may not understand what real return means, and are simply reporting nominal return expectations. That 3% difference would fall within a reasonable range of inflation possibilities. The Natixis report seems to support this interpretation of the data, as it observes that only 1/6 of Millennials (17%) "have factored inflation into their retirement savings planning." (The next sentence of the release hypothesizes a 3% inflation rate.)
Finally, note that the survey may not be representative of American households - just ones with money. It surveyed only investors with over $100K in investable assets. (About 30% Gen X, 30% Gen Y, 30% Boomers, 10% Retirees.) Most households don't have nearly that much in net worth let alone investable assets, though that's a whole 'nuther story.

Hi Catch 22,
Earlier this morning I read the article and then looked at my portfolio. I can make it on as little as a 4% return over inflation which is less than the 8.9% stated in the article. In addition, I looked through my stack of funds; and, I have two that bettered the 8.9% objective over a ten year period. They were FDSAX and SPECX. However, remember the 2007 and 2008 returns from the Great Recession that brought the average down will soon be coming off at the end of next year. My broker has the thinking that a balanced portfolio will return somewhere between 6% to 8% on average over the next ten year period depending on it's equity allocation and positioning. He is not looking for great things from bonds.
Since, January 1, 2009 as reported by my investment brokerage account statements my master portfolio's annual return including cash has averaged 9.65% through September 29, 2017. So, this beats my brokers outlook.
I think what the article was trying to establish is that market returns are not going to meat investor expectations.
I wish all ... "Good Investing."
Old_Skeet

So, an 8.9% return over inflation, eh? No mention of taxes on distributions or other withdrawals relative to the required annual real return %.
Wondering which Natixis choices will meet the requirements of the "investors" as noted in the article.
https://ngam.natixis.com/us/funds-by-asset-class
Presuming the respondents are all Natixis account holders in this survey and use Natixis advisors, too; and yet the respondents express, IMO; very conflicted opinions of what they think they understand about investing, trusting an advisor, and risk and reward to obtain the return.
Would be interesting to actually chat with these folks about where they obtain or rationalized "their" return goals.
Anyone here know of investment vehicles/choices mix over the many years, with nominal risk/reward that would provide an annualized return of 11.9% (3% average inflation over the longer term backwards looking) and without knowing about taxes on returns?
Back testing with cherry picking investment does not count; as the article is about forward returns, yes?
Well, anyway; another coffee here and to the great outdoors.
Regards,
Catch

Let the market come to you, and get in the trend early.
If your timing system is based mainly on buying when a security's Slow Stochastic (5,1) goes below the 20 line and then crosses above 20, it may take some patience to find occurrences of this situation. Say you give up waiting for such a new trend and get in an established one that you had overlooked. If its Slow Stoch is already up to 80 or more, you've missed part of the upturn and are that much closer to the inevitable sell point. It would be better to spend the wait time figuring out how to better scan the universe of securities to find more candidates that work well with your system.
The following are Ed Seykota quotes:
"You have to notice trends early. If you wait and only participate in them when they've gone exponentially vertical, it's too late. Look for a fresh trend."
"The lizard ... just hangs around on the rock ... and waits and waits and waits ... for his pattern to show up ... and when a bug comes along, he makes his move, right from the gut, without thinking about it."

Hi @slick,
Thanks for opening the thread about a subject that should interest many. I am not going to comment on what I have been doing within my own portfolio for I feel I have written perhaps more than I should have about it in other threads. I do wish to complement you on having a plan and first looking at what you have through Xray before tweaking. I'm thinking to many investors tweak before they study what they have before they make changes in their positioning. Another thing is that you have some funds that have really performed well and that should help cover the lower producers. Interestingly, since I hold a good bit of cash (some of it in a CD ladder) which currently is about 15% of my overall portfolio (not counting what my mutual funds hold) I also hold about 15% of growth type assets. When I average the returns of the two together this bubbles at about what my average overall return has been for my mutual fund portfolio as a whole (A barbell type approach of sorts). This is one of my strategies in managing cash in a low interest rate environment. I use to open and close a number of spiff (special investment) positions with some of my cash but due to current low market volitality I have not done a spiff in sometime.
Do you know what your overall return is on what would be considered a master portfolio that would include all?
Again, the stated returns you have achieved in some of your fund positions are probally the envy of many.
Please keep posting about your concepts and ideas.
Old_Skeet

FYI: While some market analysts are anticipating real market returns of 1 percent or less over the next decade, investors in a recent survey by Boston-based Natixis are expecting more -- much more.
Respondents said that they would need returns 8.9 percent above inflation to meet their goals, 51 percent higher than the 5.9 percent real returns expectation of financial advisors surveyed by Natixis. When asked in 2016, respondents said that they would need 8.5 percent real annual returns.
Regards,
Ted
https://www.fa-mag.com/news/investors-need-8-9-percent-real-returns-from-their-portfolios-34967.html?print

@Crash: Thanks for posting. I too have been a bit disappointed in SIGIX (I added enough to get the I shares) but I like the management and will give them time. Unlike you, my largest positions are 5-7%, and Im 19% foreign. My largest funds are PRGTX, VDIGX and SMGIX, all in the 5-7% range. I do watch PNM as you know, its who I pay my electric bill to when I have one(solar panels are a good investment here since we get 300 or more days of sun here.) , and watch for info to send when its in the local paper, and I have a number of friends that recently retired from there. They are great corporate citizens in NM, granting funds to nonprofits every year.

I use all actively managed funds, apart from wife's 403b, in Vanguard's small-cap index fund, VSCIX (but administered through MassMutual: fees, fees, fees. Still, at least the fund's ER is miniscule. It seems like everywhere you look, employer-sponsored 401k and 403b just suck, due to not enough choices available, or only bad ones. VSCIX has done well for us, though.) My two anchors remain balanced funds, PRWCX--- over one-third of entire portf. And MAPOX, at 15.81% of portf. The Morningstar X-Ray shows me where I want to be. I'd be approx. 60/40 stocks/bonds, if it were not for the cash held by the fund managers, so the mix comes up as:
US equity 44%
Foreign equity: 11
Bonds of all sorts: 35
"other" 2
CASH: 8
PRWCX has been my best decision, since I started investing in 2002. I'm 63, just started taking SS. MAPOX is lagging its category THIS year, but I DO like the longer-term numbers. Also own small-cap MSCFX, in the same fund family. My (TRP) PRDSX is doing much better than MSCFX this year. But PRDSX is a "quant" fund.
I make my moves generally after the New Year, when all cap gains and distributions have been made. PRIDX is on fire, this year, so far. Glad I got into it, in early 2016.
PTIAX will be added, for the hefty monthly pay-outs, as soon as I can do it. And I'm still riding a single-stock position through DSPP: PNM. I took profit a little while ago. We're doing a bunch of traveling, this year and next. But I plan to continue dollar-cost-averaging into PNM again, and also want to add BMTC (Bryn Mawr Trust) through DSPP, too.
SFGIX has disappointed, but it's SUPPOSED to be rather conservatively run, in that riskier EM slot. It's Just 2.42% of portf. at this point.
When it comes to investing wisely, you can lead a horse to water, but you can't make him drink.
"Horse To The Water." From "Concert For George:" 2002. Royal Albert Hall, 1 year after G. Harrison's death. Song co-written by George Harrison and his son, Dhani Harrison. Dhani appears stage-right to Sam(antha?) Brown, who's singing. Looks just like the old man, eh? ENJOY!

I always like to track ytd at the end of each quarter (used M* ytd as tracking device) and came up with very few surprises but a few revelations on my portfolio. I will be the first to admit I trade a small part of portfolio,generally sectors as they wane or I take profits in some areas that have sudden dramatic rises, but most of my portfolio I use a buy and hold strategy. Im 66 and have a rather aggressive portfolio, with most of my bond exposure in taxable accounts (yes I know that is not the best place, but much of it is from proceeds of bonds I inherited). Im 70/30 equity/bonds or cash. Have a total of 32 etfs and managed funds with a few stocks for good measure.
What I found out was 10 of my funds had a 20% or more return ytd, 11 funds 10% to 19% and 11 funds 1-10% return. The last category were my bond funds, small cap and reits, no surprise there. My conclusion is that it seems well balanced aggressive vs conservative. The four that did the best were PRGTX, MSEQX, CMTFX and OSMYX, each had 30% + returns. I did sell my biotech fund FBITX in early spring, reinvested proceeds into IHI (Medical Devices) and as it turns out, mighthave been better to hold biotech, but I do like IHI. I am still a bit overweight in healthcare, just in more diversified hc funds. I was a bit surprised by my bond funds doing okay, better than I expected, putting trust into managed funds vs etfs in that space.
There were many days I was tempted to dump my consumer staples, and even though they are more or less in the dumper, kept most of it, just lightened it a bit. My biggest disappointment I think was my bank fund, but at least im positive ytd although not by much.
Hoping some others post some of their own revelations, mistakes or good moves for MFO members to see, thought it might be an interesting thread.

Finally found a copy of the iMoneyNet taxonomy of enhanced cash vehicles:

• Cash plus funds - mark to market, seek $1 NAV, up to 180 day maturities
  
• Enhanced cash funds - floating NAV (like RPHYX), durations up to a year
  
• Ultrashort bond funds - floating NAV, durations 1-3 years

I'm still reading through the 10 page presentation. The list above came from graphic on p. 3.
http://www.imoneynet.net/mkt/pdf/2016-cpiwg.pdf

Hi @Tony
You noted: " However, I did not find a definition of "buy range" or "buy zone," or what the graphs' blue line is."
Agree.
I did enlarge (bottom right corner, 4 diagonal arrows) the graphic and found the blue line is relative strength vs SP500.
Another chart view (3 year), of which; you have already viewed in one fashion or another.
http://stockcharts.com/h-sc/ui?s=IBB&p=W&yr=3&mn=0&dy=0&id=p86325357921

ISTM that enhanced cash is a poorly understood or appreciated type of investment, both generally and especially in light of poor execution and implosion in 2008. See, e.g. Schwab Yield Plus).
As the old (2006) Northern Trust paper linked to above points out, you should have at least a one year time frame in mind, otherwise stick with cash equivalents. Enhanced cash investments do come with risks. Personally, I do feel that that risk is worthwhile, if one understands the nature and magnitude of the risk. Especially in a taxable account where one has the option of writing off a (small) loss should that occur. Though in taxable accounts there are some good ultrashort muni bond funds that can come close to RPHYX in after tax returns.
I'm not sure how STB65 has managed to lose parked (as opposed to traded) money in RPHYX.
Monthly 2017 return figures from M* (Jan, Feb, ..., Sept): 0.29%, 0.18%, 0.23%, 0.19%, 0.20%, 0.13%, 0.14%, 0.12%, 0.24%.
Quarterly 2015-2016 figures (1Q2015, 2Q2015, ...): 0.64%, 0.48%, -0.36%, 0.10%, 0.92%, 0.86%, 0.91%, 0.59%.
Annual returns since inception (starting 2011): 3.86%, 4.20%, 3.39%, 2.65%, 0.86%, 3.31% (2016). 2017YTD 1.72%.
Repeating: you should have at least a one year time frame in mind.

+1
the way of all students

Another sector (not "the" other one) knocked out was consumer staples (one of the four in the index in July). The one replacing it in August was industrials.
https://barxis.barcap.com/US/7/en/etnsnapshot.app?instrumentId=174066 (July 2017)
The SPDR Sector figures above are price figures, not NAV figures (though there's not much difference). I figure the latter should be a little more accurate if what one is interested in is how the sector performed as opposed to how one would have done by investing in the particular ETF.
With that in mind, here are the NAV figures for XLP (consumer staples), XLY (consumer discretionary), and S&P 500 total return, from M*:

Month    XLP     XLY    S&P
Sept    -0.64   0.82
Aug     -1.06  -1.84    0.36
July     0.66   1.86    2.06
June    -2.28  -1.21    0.62
May      2.70   1.11    1.41
Apr      1.05   2.42    1.03
Mar     -0.40   2.04    0.12

(M*'s XLY's NAV figure for Sept looked way off; I used price performance here.)
As you can see, consumer stocks didn't fare well, whether necessities (staples) or discretionary.

I wonder what to make of RNWIX holding only 6% in frontier markets. Does this suggest that Geritz feels that in an emerging markets portfolio, less than 10% should be allocated to frontier markets? (Either as a general rule or based on the current investment environment.)
If the emerging markets sleeve makes up, say, 10% of your overall portfolio, that would imply the frontier markets portion would be less than 1% of your overall portfolio. Which then leads to the question of whether frontier markets can play a meaningful role at all.
I could be overthinking this, but would be an interesting question given that Geritz is in a unique position, having gone from managing a frontier markets fund to managing an emerging+frontier markets fund.