6. Estimate the Future Value of Your Current Assets, Using a Rate of Return That Is Realistic Based on Your Investment Portfolio and Asset Allocation

If your asset allocation is 50% bonds and 50% stocks,1 a reasonable expectation for the rate of return may be about 7%.2

1 The 50/50 split of stocks and bonds is an arbitrary choice here, intended to reflect a typical mid-life investor. That ratio may shift with age, allowing young investors to take greater risks in pursuit of long-term gains and older investors to take lesser risks in pursuit of short-term liquidity and security.

2 Because peaks and valleys are to be expected in the market, the estimate of a 7% return will be more reliable over long periods of time when those peaks and valleys ...

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