Which investment portfolio is right for you?

Currently, Sorted 60plus uses, as a default, an expected rate of return that is generated from a 'conservative' portfolio of assets (30% shares and property). This is a low risk portfolio suited to people with a shorter time horizon.

However, if your investment horizon is more than 10 years but less than 20 years, you may want to select a 'balanced' portfolio (50% shares and property).

If you have significant savings and investments or are more inclined to accept some votality in your returns, you may want to invest in a 'growth' portfolio (70% shares and property). That should give the best long-term returns.

Choosing real rate of return: 1% - 1.5% a year - a wholly cash and bonds portfolio

The expected long-term gross return on a wholly cash and bonds portfolio of investments is expected to be about 5.5% - 6.0% a year.

This is based on a portfolio of investments with about 80% in cash and 20% in fixed interest investments like Government bonds.

The net real rate of return of 1% - 1.5% a year is after fees and taxes of around 2.5% a year, and allowing for inflation at an estimated long-term rate of 2% a year.

Source: Melville Jessup Weaver - Consulting Actuaries

Choosing a real rate of return: 2% a year - a conservative portfolio

The 60plus budget and spending your nest egg calculators assume a real rate of return of 2% a year, after fees and taxes of around 2.5% a year, and allowing for inflation at an estimated long-term rate of 2% a year.

This is based on a conservative portfolio of investments - with about 25% in shares, 60% in fixed interest investments like Government bonds, 5% in property and 10% cash in the bank. The returns expected from this 'lower risk' portfolio include any capital gains on property and shares.

The expected long-term gross return on such a portfolio is expected to be about 6.5% a year.

Source: Melville Jessup Weaver - Consulting Actuaries.

Choosing a real rate of return: 2.5% a year - a balanced portfolio

A real rate of return of 2.5% a year is after fees and taxes of around 2.75% a year and allowing for inflation at an estimated long-term rate of 2% a year.

This is based on a balanced portfolio of investments with about 40% in shares, 40% in fixed interest investments like Government bonds, 10% in property and 10% in cash in the bank. The returns expected from this 'medium risk' portfolio include any capital gains on property and shares.

The expected long-term gross return on such a portfolio is expected to be about 7.25% a year.

Source: Melville Jessup Weaver - Consulting Actuaries

Choosing real rate of return: 3.0% a year - a growth portfolio

A real rate of return of 3% a year is after fees and taxes of around 3% a year and allowing for inflation at an estimated long-term rate of 2% a year.

This is based on a growth portfolio of investments with about 60% in shares, 25% in fixed interest investments like Government bonds, 10% in property and 5% in cash in the bank. The returns expected from this 'higher risk' portfolio include any capital gains on property and shares.

The expected long-term gross return on such a portfolio is expected to be about 8.00% a year.

Source: Melville Jessup Weaver - Consulting Actuaries