Consuelo Mack is a long time fan of Professor Burton Malkiel and Dr. Charles Ellis. In fact, she had both of them on her show several times. So naturally, she was intrigued when Burt and Charley joined the Rebalance team and took a central role leading the firm’s Investment Committee and helping to design and monitor the firm’s retirement portfolios. These two legendary financial thought leaders are very sought after by financial services companies, university endowments, and pension plans.
What is so special about Rebalance? Ms. Mack decided to dedicate a 30-minute episode to how the firm is part of a new generation of investment advisory companies that leverage technology and innovative business models to provide consumers with fundamentally more attractive and lower-cost retirement investing options.
In this segment, Professor Burton Malkiel discusses his expected rate of return in today’s market:
Consuelo Mack: This week on Wealthtrack, putting your retirement portfolio on autopilot. Financial thought leader Burton Malkiel has teamed up with online investment advisory pioneer Mitch Tuchman to offer retirement portfolios of low-cost index funds that automatically rebalance. Why they believe the combination will lead to smooth retirement landings is next on Consuelo Mack Wealthtrack.
Consuelo Mack: What’s a realistic expectation now for a diversified portfolio as far as annualized returns? It has come down a lot, right?
Burt Malkiel: My sense is that a diversified portfolio of common stocks, one ought to think of certainly no more than a 6% rate of return. I don’t think it will be the 9% to 10% that we have enjoyed over the last 100 years. I think that by getting into some of these other markets, like emerging markets, we can do a little better than that. I think real estate is still a relatively good investment outlet for people, which we access through REIT index funds. So, I think we might be able to do a bit better than that, but we are clearly in a single-digit world today, and we don’t want to give anybody the impression that it’s 10% from now until kingdom come, it just isn’t. What’s important for people to realize is if they are saving on the basis of thinking that they are going to get 10% rates of return, I don’t think it’s going to happen.