Portfolio Return Expectations By Investors Are Too High

A stunning post from VisualCapitalist showed a poll of 8550 investors and 2700 advisors and the gap between the two of future portfolio return expectations. The poll was global; however, I will focus on this post’s domestic portfolio return expectations.

investment return expectations

Note the gap between investors’ and advisors’ portfolio return expectations in the U.S. is the widest of any country. However, as we will discuss, that gap is unsurprising given the outsized returns relative to long-term historical portfolio returns since the “Financial Crisis.”

However, here is the most apparent problem with which advisors are more correctly aligned. It is a true statement that over the very long term, stocks have returned roughly 6% from capital appreciation and 4% from dividends on a nominal basis. However, since inflation has averaged approximately 2.3% over the same period, real returns are closer to 8% annually.