Balanced is best: Never doubt long-term portfolio gains

No matter what the markets do in the short term, the long-term potential from investing is not in question

The end of a wild week for stocks is an ideal time to remind ourselves that short-term pain and long-term investing gains still go together.

No matter what the markets do in the short term, the long-term potential from investing in stocks is not in question. A panel of investment industry people make this point in their projections on what investors can expect from a balanced portfolio over the next 10 years.

The panelists – 11 chief investment officers, portfolio managers and advisers – were asked in September to provide an estimate of average annual returns over the next 10 years for a portfolio based 60 per cent in stocks and 40 per cent in bonds. Responses began flowing in as the market decline gained momentum.

Most panelists said balanced portfolio returns will range from 5 to 6 per cent on an average annual basis. Asked about inflation, they provided estimates of between 1.8 and 3 per cent. This suggests real returns (after inflation) of at least 2 to 3 per cent.

A balanced portfolio will slog its way over the next 10 years to returns that will beat holding bonds or cash. So keep the faith in stocks.