Expectations about real returns - Are they realistic?

In this article, the authors provide empirical evidence concerning real ret urns for stocks and bonds in order to consider their impact on spending rul es for large portfolios. Their analysis of the data supports the argument t hat 5% (or higher) real returns are not sustainable in the long run. Theref ore, an endowment fund that is invested in equities, spends 5% a year, and earns the real return on stocks will, in all likelihood, see its market val ue decline below the beginning value at some point, absent new contribution s. The actual record, shown in the article from a probability standpoint, c ould lead institutional investors in particular to reformulate their expect ations about real returns, and may also influence individual investors' exp ectations about future real returns.