What do investors need to earn 7%

Nader Hamid, Portfolio Manager with TWM Group at iA Private Wealth presents our Chart of the Month. You can also see this video in French presented by Jean Hénault by clicking here. 

This month, our chart selection illustrates the elements necessary to construct a portfolio that aims to deliver a 7% percent return.

To get a 7% return in 1995, an investor needed only to be invested 100% in quality bonds without having any stocks in his or her portfolio.

Ten years later, in 2005, we had to replace half the bonds with stocks to generate the same 7% return.

The stock basket included 25% large caps U.S. equities, 5% small caps, 10% international equities, 5% emerging markets, as well as 5% in real estate.

In today’s low-interest-rate environment, to get the same 7%, a portfolio needs to be even more aggressive—almost 90% in stocks and 10% in high-yield bonds.

Note that the volatility an investor needs to tolerate, measured in standard deviation, has increased over three times since 1995, from 6 to 19%, just to achieve the same result.

The Key Takeaway?

Today’s investors need to scale back on return expectations or cultivate an increased tolerance for volatility if they hope to fulfill their long-term objectives.

On behalf of TWM Group, thank you for watching our Chart of the Month. See you next time.

Invest with TWM Group

Our clients and their families typically have a net worth of $2M or more. If you have an amount under the minimum, we still invite you to get in touch with us to discuss your options.

*Please note that TWM Group does not provide investment advice nor do we solicit or share personal information through public forums or platforms such as social media. Please communicate with us only through official channels like email, the client portal or your portfolio manager.