{"id":2863,"date":"2019-04-15T12:01:32","date_gmt":"2019-04-15T02:31:32","guid":{"rendered":"https:\/\/adelaideprivatewealth.com.au\/uncategorised\/meet-the-realistic-investor\/"},"modified":"2019-04-15T12:01:32","modified_gmt":"2019-04-15T02:31:32","slug":"meet-the-realistic-investor","status":"publish","type":"post","link":"https:\/\/adelaideprivatewealth.com.au\/meet-the-realistic-investor\/","title":{"rendered":"Meet the realistic investor"},"content":{"rendered":"
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Investors should be realistic. This means being realistic in setting their long-term goals, being realistic in their expectations for investment returns and being realistic in their spending habits.<\/p>\n

Critically, the reasons for being realistic with your goals, return expectations and spending are indelibly linked. Being unrealistic in any of three may throw the others off course.<\/p>\n

The case for investors to take a realistic approach is particularly worth highlighting given widespread expectations for subdued returns over the medium-to-long term from diversified portfolios together with the likelihood of higher volatility.<\/p>\n

A Vanguard research paper* published several years ago \u2013\u00a0Required or desired returns? That is the question<\/em>\u00a0\u2013 closely examines the need for investor realism.<\/p>\n<\/p>\n

Realistic goal-setting<\/h3>\n

As this research paper discusses, financial planning should result in an estimate of the return needed to achieve investors\u2019 realistic objectives given such factors as their investment time horizon, current assets, savings pattern, tax position and risk tolerance.<\/p>\n

Realistic return expectations<\/h3>\n

This thorough financial planning process should provide an estimate of an investor\u2019s\u00a0required<\/em>\u00a0return from their portfolios as opposed to a\u00a0desired<\/em>\u00a0return.<\/p>\n

\u201cThe required return is the return necessary to accomplish the goals that the investor has determined to be most important while bearing the level of risk that the investor feels is most palatable, \u201cthe researchers explain.<\/p>\n

Key points to help understand the often-overlooked difference between required and desired returns include:<\/p>\n