The sign on the Gates of Hell in Dante's Divine Comedy warns all who would or must enter that it's hopeless down there. Far, far less serious but still very frightening for investors for the next decade is John Hussman's recent ten year projection for bills, notes, corporate bonds, Treasurys, and stocks. http://screencast.com/t/3mAAusLsig
The chart's X-axis runs left to right from least risky (TBills) to riskiest financial asset (stocks). The Y-axis is the nominal (current dollar) annual rate of return to be expected from each asset class. Each colored curve is for a different important starting date. It is generally expected by investors that decade-long returns rise with risk taken, as the colored lines for August 1982 and March 2009 promised. But the curves for March 2000, August 2007, and May 2011 are quite different.
The projections from just now for the next ten years are shockingly meager across the risk spectrum just when many millions of soon-to-be retirees are hoping for much larger returns. Inflation of 3% and taxes would totally erase projected returns of 0-3.5%! Buy and hold specific assets and you will lose overall under almost all plausible inflation/deflation scenarios.
Some implications for coping with 3.5% annual returns are needing someone to trade for you (fund or trust), learning to trade for yourself, or keeping it all in TBills just to preserve nominal dollar value. No mix of financial assets will guarantee greater gains overall, although the very modest gains may be different at different times in each asset class. Hussman doesn't discuss inflation in detail, but clearly it would wipe out a traditional balanced portfolio under his projection. Even a typical Harry Browne portfolio with 25% each in bills, bonds, stocks, and gold would have a hard time. But before we get too far into portfolio construction for this future, let's be sure to read and understand it completely: http://hussmanfunds.com/wmc/wmc110509.htm