Following on from the “8 Curiously Common Mistakes That Investors Make” article and how it is often human nature to expect investment returns to only go up after a period of good returns, it is worth noting that a generally held view amongst asset managers is that we are going into a lower-return, higher inflation world. The point is it would be prudent to lower our expectations going forward.
Ten years is a long period to forecast but the following is Coronation Fund Managers, a leading asset management company’s forecast of asset classes over the next 10 years:
|Last 10 years
|10 year forecast
|Local Shares||19.9%||7 – 10%|
|Global Shares||12.1%||10 – 13%|
|Local Property||23.6%||7 – 10%|
|Local Bonds||9.2%||6 – 9%|
|Global Bonds||9.0%||5 – 8%|
|Cash||7.9%||6 – 8%|
With regard to inflation in South Africa, and looking specifically at middle to higher income groups, Coronation Fund Managers believe that real inflation is higher than 6% because of the disproportionate exposure of these groups to electricity, water & rates, education and insurance (including medical aid).
*Average amount of money earned each year over the 10 year period.