Tag Archives: Rob Arnott

Saving and Investing for Retirement: Part Five

Effective Actions in an Uncertain World: Part Five of Our Special Five Part Series

There are a number of factors that we need to predict in order to come up with saving and investing strategies for retirement.  The values that we assign to these factors will have a huge impact on whether or not we will be able to meet our goals.  First, there is the expected return that investors will make on their retirement savings.  Second, there is the common estimate that people will need about 85% of their pre-retirement income to support them once they stop working.  Finally, there is the potential impact of behavior on savings rates, investing, and spending.  Continue reading

Rob Arnott’s Sobering World View

Rob Arnott is one of the few experts who predicted that the past decade was likely to be unpleasant for equity investors.  In early 2002, he wrote a paper with Peter Bernstein that concluded that stocks were quite likely to under-perform bonds over the next decade.  In mid-2009, having seen a long period in which bonds had, in fact, outperformed stocks, he wrote an article that was titled Bonds: Why Bother?

In this article, Mr. Arnott presents data to demonstrate that bonds have persistently out-performed stocks over a number of very long (multi-decade) historical periods.  He then shows that when you look at price appreciation of stocks, net of inflation, there were three 20-30 year periods in the 20th century in which the real prce appreciation of stocks was less than or equal to zero! Continue reading