Is it possible to create a defensive portfolio that gains at least 7% every year, and no less?

Question

I'm interested in creating a portfolio that has historically returned 7 percent every year, and no less.

Is a money market fund (5%) the closest I'm going to get, or is there some magical combination of bonds & defensive stocks that could get me that 7 percent every year? For the moment, I'm not interested in annualized returns. I need highly predictable returns for every year. Thanks for your help!

Answer 1

If you are investing long term (more than 5 years), then you could very easily create a portfolio that would result in an average 13% return. That is the average return of the stock market as a whole (as measured by the S&P 500 Index) in any 5 year given period. I would purchase either a mutual fund or a passively managed ETF that represented the S&P 500. If you aren't against risk, invest in a stable foreign market equivalent to the S&P 500, such as Canada or Europe. By putting 60-75% of your money in an SP500 fund and 40-25% of your money in a foreign fund, you would be considered well diversified and be earning an average of 17-21% on your investment.

On the other hand if you are just wanting to save short-term (less than 5 years), stick to high yield savings accounts (such as HSBC Direct). Hope this helps!

Answer 2

Well you couldn't guarantee 100% that you wouldn't lose money, but a 7% return is pretty conservative. You'd stay in the moderately safe area for mutual funds at the 8-9% range. Call a broker and look at some options. In the long run, you are going to make money, even if you have some off years. Don't invest if this is for the short term.