Morningstar Runs the Numbers

Inspired by Harper's Index (with a tip of the hat to FiveThirtyEight's Significant Digits blog), Morningstar Runs the Numbers uses a numbers-based approach to highlight recent Morningstar research, along with some outside news stories.

This week's edition runs the numbers for the 2016 Morningstar Investment Conference.

95% of investors Bill Bernstein isn't worried if more advisors move toward recommending passive funds in response to the Department of Labor's new fiduciary standards:

Assume that the new legislation does indeed cause investment advisors to herd for legal protection so that they put their clients mostly into bland market-index investments. What's wrong with that, Bernstein asked? "If everybody owns the market portfolio at a cost of 0.05% per year, 95% of investors would be better off under that future than they are today."

60/40 = 80/20 = 40/60 From our How Portfolio Managers Tackle Asset Allocation session:

Moderator Jeff Holt started with a poll for the panel: What stock/bond asset allocation returned the most over the past 15 years? 60/40, 80/20, or 40/60? Everyone who raised a hand got a right answer: $10,000 would have grown to nearly $23,000 with any of the allocations.

6% to 7% per year Via Vanguard CEO Bill McNabb's keynote presentation:

Vanguard's forecast for the next decade: 6% to 7% per year (in nominal terms) for stocks, 2% for bonds. That makes for about 4% on a balanced fund, after expenses. Better than cash in a mattress, to be sure, but the magic of compounding will be less spectacular than most investors realize.

8 to 1 Rob Arnott of Research Affiliates explains the meaning of the current valuation of growth stocks relative to value stocks:

So just a very simple measure what's the valuation multiple price/book value for growth relative to value, normally it's 5 to 1, sometimes it's narrower, it's 3 to 1. Right now it's 8 to 1. OK, when it gets that spread, value's cheap. Does that mean value will win this year? No, it doesn't, does it mean value will win for the patient investor over the next five years? Pretty darned high odds. Value has never been this cheap without winning over the next five years.

4% withdrawals David Blanchett on why a 4% portfolio withdrawal rate is less of a sure thing today:

… these success rates are all based on historical return rates. When using projected future returns, which aren't as rosy, prospects are much dimmer. A balanced portfolio has approximately a 50% chance of success, a "coin flip," as Blanchett put it, while an all-bond portfolio has only a 3% chance of 30-year success. He suggested that we've overstated the safe withdrawal rate because the U.S. market has done so well for investors in recent years.

11 years Via the Securing Retirement Success for Women session--the impact of gender income inequality:

The panel referenced a study conducted by the National Women's Law Center that showed this loss of lifetime income for a woman who works full time over a 40-year period exceeds $430,000. Miller noted that in order to make up for this loss of income, a typical woman needs to work a staggering 11 years longer than a comparable man.

A 25% chance From the Navigating Today's Challenging Bond Environment session with panelists Rick Rieder from BlackRock, Carl Eichstaedt from Western Asset Management, and Mihir Worah from PIMCO:

Rieder thinks there's just a 25% chance that the Fed will raise rates in July, and expects maybe one increase this year. Worah remains in the one-or-two-rate-hikes-this-year camp. What he'll be listening for: whether the Fed refers to labor market behavior. If it does, a hike may be on the table in July.

2.5% and 2.5% Franklin Templeton's Michael Hasenstab explains why he believes Mexico is mispriced:

Mexico is a case where the market has traded as if the country is in the worst crisis in their history, worse than the Tequila crisis, worse than the global financial crisis. Yet, Mexico is exhibiting pretty stable growth at 2.5%, pretty stable inflation around 2.5%, has ample internal reserves, does not have a lot of debt, is running orthodox and very prudent policy. We think this is massive mispricing. Fundamentally, good country, priced as if it's in the worst crisis in history and we think that's a mistake.

Most Popular Articles, Videos, and Securities

Most Popular Articles

• 7 Fund Analyst Rating Downgrades in May
• Three Keys to Retirement Investing
• A Deeper Look at Three of Our Top Performing Ultimate Stock-Pickers
• Recapping the Model 'Saver' Portfolios
• Why Are Primecap Funds So Sustainable?

Most Popular Videos

• Hasenstab: Extreme Undervaluation in Emerging Markets
• Our Favorite Allocation Funds
• Dividend Growth Dwindles as Earnings Growth Slows
• Weekly Wrap: Market Underestimates Biogen
• What Does Brexit Mean for U.S. Investors?

Most Requested Stock Quotes Apple Microsoft IBM Berkshire Hathaway Wells Fargo

Biogen

Microsoft

Apple

Williams-Sonoma

Hanesbrands

Most Requested Fund Quotes Vanguard 500 Index Vanguard Dividend Growth Vanguard Wellesley Income Fidelity Contrafund Vanguard Wellington

Most Requested Fund Analyses

Vanguard PRIMECAP

Vanguard Wellesley Income

Vanguard Dividend Growth

Vanguard PRIMECAP Core

Dodge & Cox International Stock

Most Requested ETF Quotes SPDR S&P 500 Vanguard Total Stock Market Vanguard REIT Vanguard High Dividend Yield Vanguard Dividend Appreciation

Most Requested ETF Analyses

Vanguard Dividend Appreciation ETF

Vanguard REIT ETF

Vanguard Total Bond Market ETF

iShares Core S&P 500

Vanguard High Dividend Yield ETF