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WHERE THIS STARTS:
According to Credit Suisse, and several other analysts…”Young people stand to make dismal returns on their investments.”
Unlike other generations, which have benefited from a relatively uninterrupted economy…Gen Z is forecasted to take on a market with higher unemployment, lower earnings, and higher taxes to pay off debts..and because of that, their returns will be lower than they were previously.
To put that into perspective, a 2% difference in returns over an extended period would mean that 30-year-olds today would have to work SEVEN YEARS LONGER, OR DOUBLE their savings in order to live as well in retirement…and that needs to be considered in how you invest moving forward.
Their advice was to consider saving more money, invest more money, consider alternative assets that might have a higher return, watch out for high fees, and to seriously explore the idea of how a lower return would impact your goals.
That’s the biggest problem with ANY “market prediction” article out there, like the ones we’ve just seen…they all take into account the current landscape of our economy, and what we ALREADY know is going to happen…and that’s the best that they can do. Even though, on the surface, it makes SENSE that we won’t see these types of returns indefinitely – it does bring the awareness that, at the end of the day, NO ONE knows what’s going to happen…that’s why, I’ve taken this approach that hopefully encompasses a little bit of EVERYTHING so that, no matter what happens – you wind up making money.
ONE: Don't hold 30% bonds
That’s because, the main purpose of investing in bonds is for stability…even though BONDS don’t get crazy huge gains, they don’t see large drops, either…and when the market is in a free fall…bonds can keep you from losing too much money. But, someone who’s just starting out today doesn’t need that type of safety net – given that, they might fine investing 100% in the stock market without any worries about “needing the money” before the market has enough time to recover.
That way – IF the market winds up going down, you don’t have ALL of your eggs in one basket.
THIRD: PLAN FOR LOWER RETURNS
I think it’s EASY to get spoiled in a market like this, where earning 5-10% in a month seems REASONABLE…but, when you look at the markets historically…that’s not NORMAL, and that isn’t going to happen forever. LONG TERM, we’ll likely return back to our averages of 5-8% per year after taxes and inflation…and that’s something that you should plan for, NOW.
FOURTH: SAVE MORE MONEY
Best case scenario, you invest more money than you need and have EVEN MORE profit while the markets go up in value…worst case is that your investments DO EARN less money as warned, and then you’ll be happy you saved more.
FIFTH: TAKE EVERY PREDICTION WITH A GRAIN OF SALT
At the end of the day, there are SO MANY variables that could change the entire landscape of the economy within a moments notice…and even though every investment analyst is doing their best with the information they have available…there’s still going to be a missing piece that we don’t know until after the fact.
So, my best advice is this: planning for a lower return is NOT going to be a bad choice…but, don’t take it literally, and still do your best to invest as you would normally.
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