Investors should no longer rely on past performance as an indicator of how well their investments will do in the future, according to a study by the Schwab Center for Investment. The report projects that returns over the next 20 years will be “significantly lower than some investors have come to expect.” Among them: Large-caps and international stocks should grow annually by about 8.6%, down from a historical average of 11.1%. In the long term, for example, that could mean the difference of $30,000 on a $10,000 initial investment. Mid- and small- caps are expected to return 10.3%, with bonds and cash equivalents rising 4.4% and 2.9%, respectively. “The discrepancy between what investors think they will have at retirement and what they actually have can become magnified when returns compounded over a long-term investment horizon,” V.P. Jim Peterson said in a statement. The Schwab report recommends that investors should “avoid unnecessary fees and taxes in this era of lower-than-average returns.”
