One of the benefits of solid planning is that it gives a retire peace of mind. To the extent that you can develop reasonable expectations about what should happen, and then watch them come about from one year to the next, it goes a long way toward providing assurance that things are as they should be.
Some situations are more likely to produce predictable outcomes than others. That’s just the way things are. An investment grade bond is probably going to do more or less what it’s supposed to in terms of interest payments and pay off (though its value may fluctuate some during the holding period). A rental house is likely to have both a fairly consistent value, and produce results which fall within a fairly tight range, assuming it stays occupied most of the time and only has major repairs to hit every few years.
But the stock market is a different story. In fact if you look at annual results for the market going back 20 or 30 years (and likely even further), you can’t find a single year when it earned the same thing as the year before. And it’s not just that the returns are a little different: in many cases they are wildly different (e.g. up 15% one year, down 20% the next).
When swings of this type are the historical norm, it is impossible to infer any sort of consistency. And without consistency, it becomes that much harder to know each year whether things are on track or permanently derailed.
Investors often favor vanilla assets with earnings profiles that are less than what they know they are going to need for long-term financial success (CDs are a prime example…). They do this because they can at least know what the results are going to be. We’re not advocating going that far: if an asset is known to have inadequate yields that’s going to cause problems of a different type.
But assuming you can get a return that’s more in line with your plan/budget needs, a consistent producer is going to have some qualitative benefits in terms of planning and monitoring. The stock market simply doesn’t have that set of characteristics as part of its list of pros. Which is something that investors should consider when making allocation decisions.