Over the last decade, the FE Balanced Index (a Balanced portfolio proxy) generated a real (after inflation) return of 4.7%pa. The following paper by DFS Portfolio Solutions considers the impact of these strong market returns on future returns.
The paper concludes that returns over the next decade are likely to be significantly lower. The team sees strong reversals of the significant tailwinds of the last decade, as noted in the table below.
The lower return outlook has significant implications for investors and particularly for those that are drawing down on their portfolios to fund their lifestyle requirements.
The paper highlights the need for clients to re-visit their personal risk attitudes and investment preferences with their adviser, if and where appropriate.
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