What are Your Investment Return Goals for Next Year?

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We like to set a numerical goal each year for our investment returns and for the last number of years we have set a 7% goal on our personal holdings and our regular model portfolios on this site.  While we set a numerical goal we really have to define our needs and tolerances prior to setting a percentage goal.

In our case we are generally very conservative people–and in particular my wife is extremely conservative (likely too conservative).  We are at an age where we expect to work a few more years at full time employment and after 2-4 years are up we probably will busy ourselves with some part time gigs–10 hours a week.  We both currently draw reasonably good pensions from General Mills which are fully funded (per the latest statement from the company) and should be relatively safe.  Additionally my wife receives a generous health care stipend from the company since she had 30 years of service at the time she ended her employment with them–which is banked as we have health care benefits from other current employers.  We have a small mortgage on the house at a very low interest rate.  We have no car payments as we have paid cash for the last 4-5 vehicles we have bought (we never buy new–opting to let someone else take the depreciation and then buying a 2-3 year old car).  We have a bit of credit card debt–most being paid off monthly–but some at 0% until mid 2015 which we are not motivated to pay off.  

It will be 4 years before we can both draw Social Security if we so choose and at that time (given everything we know) our income would be around $80,000/year.  This is more than adequate for living on in rural Minnesota (in fact probably higher income than 90% of rural Minnesota residents).  This does not include any earnings off of investments etc–just pensions and Social Security. Knowing what we know today this would seem like adequate income–unfortunately many items can derail the plan.  Job loss in the next year or two–serious illness with either of us–and many other items can make what looks good today into something that is inadequate.  This is why we still worry (you will find as you get older you can worry about some things that are not very important when you are 40–but they are damned important when you are 60).  We find ourselves saving more money than we have ever saved–maybe 20% of our income–because one never knows what lies ahead.

From these factors, and certainly others, I think a 7% target is realistic and attainable.  Additionally, this 7% helps to continue to build our investment accounts that may be needed in the future.  Capital preservation is high on our agenda–so we think that any goal above 7% is totally unattainable if we are going to preserve capital–with the number of mine fields that are out there (i.e. potentially rising interest rates etc).

With our goal we will build our portfolios and in a perfect world we would not buy or sell anything after that point.  Of course the world is not perfect and we will buy and sell items from portfolios–many times we will do so based upon assumptions that are incorrect.  Other times we will do so out of fear or greed.  But in the end we feel we must preserve capital.

Each and every investor must decide for themselves where they are in life and invest accordingly.  We can not tell anyone else how to invest as there are as many different situations in people as there are people.  We attempt to supply some of the information you may need in a format which is kind of easy to use and that is our primary goal–provide information.

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Bryan Perry Dividend Income Expert Bryan Perry

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