A.I.M. Users Bulletin Board

[ls7550]

Since the 1980's we've seen a rising tide. UK Index Linked Gilt (TIPS) since 1983 have provided a 3.5% annualised real gain. Since 1983 the figures are around 6.4% for all-stock, 4.2% for AIM, 3.4% for constant weighted to AIM average cash % which again was near 50/50 average.

Add on 2.5% average dividends to all-stock and that makes its real total returns more like 8.9%. Add on 1.25% in dividends to the AIM's 4.2% real gain along with 1.7% in TIPS ('AIM cash') real gain = 7.2%, with CW being around 0.8% lower than that (6.4%). Portfoliovisualizer indicates actual all stock gains since 1983 were more like 8.7% for all-stock so those approximations look to be reasonably accurate.

Forward time however and inflation bonds are now paying negative real yields, and the rising tide effect from high to low interest rate transition since the 1980's is also most likely gone. Much of since 1980's relatively great gains hay-days have passed and we might be entering or even in a phase where AIM and its volatility zigzag trading might be a primary source of rewards. AIM will likely continue to advise when its appropriate to be light or heavy into stocks. Maybe something like stocks zigzagging to a 0% real price change, plus 2% dividends - being the real reward, compared to maybe 2% AIM real price gain, 1% dividend benefit, -1% cash benefit (cost). Whilst 50/50 constant weighted might be 1% real total.

Pessimistic maybe, but in reflection of that possibility I'm not expecting too much in the way of income provision from investments. A 4%/year drawdown rate rather than historic since 1980's rewards that might have supported 9%, along with the assumption of little remaining at the end compared to the 1980's retiree who might have had a large amount available at the end of 20, 30, 40 years.

Clive