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What Lies Ahead for Stocks? We May Be Able to Foresee This Bette

T.maddell monthly newsletter Jan20

What Lies Ahead for Stocks? We May Be Able to Foresee This Better Than You Think
By Tom Madell

Article Summary: Based on 27 years of continuous data, five year periods of strong stock fund returns for two highly representative funds are surprisingly strongly negatively related to subsequent five year returns. If the relationship carries forth into the future, one can anticipate mid-single digit returns as the most likely average broadly diversified stock fund return for both US and international stocks.


  • edited January 26
    I enjoyed reading about Dr. Madell's five year rolling periods of stock market returns. I've noticed this, as well, and have incoropated the five year rolling total return period principal, to assist me, in setting my portfolio's rate of distribution.

    What I do is a relative simple strategy. Generally, I take a sum of no more than what one half of my five year average annual return has been. With this, my current distribution rate is now at about 3.25% since my total return on my portfolio has averaged about 6.5% annually for the past rolling five years. In this way, I have found that principal grows over time since the residual is left to increase and build capital formation. In addition, I'm running a 20% cash/40% income/40% equity portfolio which generates enough income without having to sell securities to meet my current distribution needs.

    I realize that this distribution strategy is not for everyone as I'm just sharing how I govern and what I have found that has worked well for me and my family through the years. I used this strategy, years back, whan I was running my parents money, when they were retired, and I now use it for me and my wife.

    Pretty neat and information packed study by Dr, Madell.

    If you are retired and in the distribution phase of investing perhaps others can learn if more investors post how they set their rate of distrbution coming from their portfolio. Naturally, there is the RMD withdrawal requirement that is in place on retirment accounts. But, many of us have money invested outside of retirement accounts. Perhaps, Dr. Madell can write more on some strategies in an upcoming newsletter.

    I wish all ... "Good Investing."


    cc: @tmadell
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