HB's PP expectation of 5% average yearly return above inflation rate

[BP]

I have been reading Harry Browne's Why the Best-Laid Investment Plans Usually Go Wrong: And How You Can Find Safety and Profit in an Uncertain World and saw on page 267 of the book that HB expected an average yearly return over a number of years of at least 5% above the inflation rate.

Has anyone ever conducted an evaluation of the real return per year for the PP to see if it met HB's expectations? 

[melveyr]

Most backtests have the PP coming in at just around 5% real returns. They differ depending on the rebalancing bands, duration of cash holdings, and duration of the long bond. I have seen ranges between 4.5% - 5.5%.

[Ad Orientem]

Craig regularly cites 3-6% annual real returns based on back testing. That sounds about right taking into consideration the various ways people compose and rebalance their PPs.

[craigr]

Craig regularly cites 3-6% annual real returns based on back testing. That sounds about right taking into consideration the various ways people compose and rebalance their PPs.

Yes this is what I generally find. As other's have stated, it's time dependent. But over the long haul this has been what has happened in the past.

The advantage of the portfolio is that by not concentrating bets it can't be blindsided by protracted periods of bad returns in a single asset. Of course you give up absolute top performance when a particular asset is doing well, but it's less likely you'll be left holding the bag with negative real returns over long stretches .*

* I consider a long stretch 5-10 years of zero or negative real returns.

[BP]

Thanks all.