Taking a longer term view, and given a minimum of 7 years for investment, we look for returns from the FTSE 100 Index to lie somewhere between 6.9% and 10.1% per annum. The most recent decade (from 30 June 2005 to 30 June 2015) is characterised by a return of 6.3%, outside of the lower end of our range. That makes good sense when one considers that the starting and ending points in that period coincide with a maturing bull market in 2005 and some volatility today.
Our hypothetical 60-40 portfolio, comprising 60% in the FTSE 100 Index and 40% in the FTSE Gilts (5-15 years) Index, has gained 3.2% over the last 12 months, 6.5% p.a. in the last 3 years and 6.3% p.a. over the 10 year period. Adjusting those figures for inflation gives us a healthy set of real returns of 2.9%., 4.9% p.a., and 3.7% p.a. respectively.
Those positive inflation-adjusted returns are particularly pleasing when we consider that cash investments have, somewhat unusually, lost ground relative to inflation – a result of 6 years of unprecedented monetary easing.
The last year is characterised by a mixed set of results with the US and Japan performing strongly. Meanwhile relatively low returns have been provided by markets in Asia, Europe and developing world.
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