What growth expectations to have with long-term index investment?

[MBK]

I have one more questions regarding the investment. I`m currently moving forward with iDeco and NISA.

For iDeco, I`m currently investing mainly in the Rakuten US Vanguard DC.

For Tsumitate NISA, the main part of portfolio is eMaxi Slim All Country

For Junior NISA, I have not yet full set on what to focus on, but eMaxi is also in the forefront here.

I want to make a rough schedule of when and how much funds will come in the future. With insurances it`s obviously much more straight forward, but for the sake of rough calculations I want to also put some amount for the investments.

With the focus on the word "rough" what can I estimate the investment to come to with 20 years investment in Tsumitate and iDeco and 10 years for Junior NISA? Naturally the market can get volatile and any predicions can crumble immediately, but if I`m in it for a long term what growth of investment can be estimated? Are we talking about growth of a few percent, few ten percent or more in a double/triple sphere?

[Haystack]

I have one more questions regarding the investment. I`m currently moving forward with iDeco and NISA.

For iDeco, I`m currently investing mainly in the Rakuten US Vanguard DC.

For Tsumitate NISA, the main part of portfolio is eMaxi Slim All Country

For Junior NISA, I have not yet full set on what to focus on, but eMaxi is also in the forefront here.

I want to make a rough schedule of when and how much funds will come in the future. With insurances it`s obviously much more straight forward, but for the sake of rough calculations I want to also put some amount for the investments.

With the focus on the word "rough" what can I estimate the investment to come to with 20 years investment in Tsumitate and iDeco and 10 years for Junior NISA? Naturally the market can get volatile and any predicions can crumble immediately, but if I`m in it for a long term what growth of investment can be estimated? Are we talking about growth of a few percent, few ten percent or more in a double/triple sphere?

No one knows.

I would estimate 3-4% a year on average to be conservative.

However, most investors will not stay 100% equities as they approach retirement so this will vary.

[RetireJapan]

Great question!

Absent a time machine or an oracle, we can only guess at this.

Historically we have seen stock market growth of around 7% a year. This would allow your investments to roughly double every ten years or so (rule of 72). You can easily find a calculator online that will allow you to put in numbers for your starting amount, monthly contribution, expected growth rate, and expected inflation rate and play with those numbers.

We're coming off a period of intense growth, so you might expect lower growth for the next few years. Inflation is higher now than it has been in the recent past, will that continue?

Personally I find it useful to have an idea of a range of possible outcomes. It's unlikely that I will be able to make an accurate prediction, so instead I have a bad scenario (1-2% growth), an average scenario (4-5% growth), and a good scenario (7-8% growth) in my head. Working with a range allows you to adjust as you go forward and be flexible when events change.

[Tkydon]

https://www.a-tm.co.jp/top/securities/i ... /0331418A/

The long-term average 年利 you may expect an annual growth of something around +5.89%... (No Guaranty)

The good thing about Index Funds like

ｅＭＡＸＩＳ Ｓｌｉｍ 全世界株式（オール・カントリー）

is the low Management Fees, so they don't take much of your return and it grows faster.

https://www.investopedia.com/terms/f/fu ... nnuity.asp

Future Value of an Annuity

The formula for the future value of an ordinary annuity is as follows. (An ordinary annuity pays interest at the end of a particular period, rather than at the beginning, as is the case with an annuity due.)

P=PMT×((1+r)^n−1) / r
where:
P=Future value of an annuity stream
PMT=Amount of each annuity payment
r=Interest rate (also known as discount rate) (In this case Annual Rate / 12)
n=Number of periods in which payments will be made (Number of Years x 12)

r = 6% per Year/12 Months = 0.5% = 0.005 Per Month
n = 20 Years x 12 Months = 240 Month


(1 + 0.005) to the power 240 - 1) / 0.005

(3.31 - 1) / 0.005

2.21 / 0.005 = 462.04

So after 20 Years, you would expect the Fund to be worth about 462 times your monthly investment...


Over 10 years

(1 + 0.005) to the power 120 - 1) / 0.005

(1.819 - 1) /0.005

0.819 / 0.005 = 163.879 times your monthly investment...


If you can actually get a better return the multiplier and therefore the amount will go up, but better to be conservative in your expectations...

[MBK]

Thank you, Tkydon, for a very thorough explanation. Very helpful.

I also like RetireJapan`s idea and when looking for an interest calculator, I cam across this one which allows to make calculation also for variation in rate:

https://www.investor.gov/financial-tool ... calculator

[captainspoke]

As for stock market investing, there's this angle on it, too:

https://www.fool.com/investing/2020/11/ ... you-money/

Warren Buffett has said that a simple way to invest long term is the S&P500 (with maybe 10% in bonds, if you want).