Back to Basics: 6 Questions to Consider Before Investing

Ben Inker

Article

This paper presents a practical framework for estimating long-term asset class returns and judging whether strategies still merit conviction. By grounding decisions in fundamentals rather than recent performance, CIOs may better defend sound investments, evaluate new opportunities, and reconsider ideas whose expected return premiums have materially changed.

Key Takeaways

Equity Premium Persists: Rolling 10 year equity returns averaged 6.4% above cash, though several decades still produced underperformance.
Bond Premium Fragility: Bonds delivered a 1.3% historical term premium, yet every rolling 10 year period from 1947 to 1976 trailed cash.
Commodity Returns Vary: Commodities averaged 3.1% above cash, but their premium was negative during 40% of the observed period.
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