Money Mag; Q&A with J. Grantham Hi Kenster, and thank you for the article link.
Aside from the investing markets in general and to their technicals; including the political ramifications of inaction in some developed countries are the investment areas that will be affected by the age groups, and in particular, at least for this country and the developed countries is the boomer group.
Part of the fuel for positive investment returns over the past 30 years (in the U.S.) was from the large middle class made up of boomers (our house, too). The investment table is already partially turned from the "in crowd" (investing monies) to the "out crowd" (drawdowns for retirement).
This full event will continue to unwind; and especially for some who will or have found they may need more money in retirement than expected.
This area and the ultimate affect upon investments for all is a known circumstance; and I am not obvisously making a new and grand discovery; but reiterating the thought.
Yes, there will remain investment areas that will provide decent returns. However, I do believe this will require much more effort going forward.
The younger investors too, will have to attempt to continously monitor what we (this house) older folks are doing with our lives and monies.
I constantly query those in their 60's-80's as to what may cause or has caused the method or plan they had in place regarding their spending habits. While my sampling is only MI and no more than 30 folks; beginning in 2011, 10,000 boomers retire every day of the week for the next 19 years. Obviously, what these folks do with their retirement money will have an affect upon various sectors of the economy.
From Pew Research: " 10,000 - Baby Boomers Retire
As the year 2011 began on Jan. 1, the oldest members of the Baby Boom generation celebrated their 65th birthday. In fact, on that day, today, and for every day for the next 19 years, 10,000 baby boomers will reach age 65. The aging of this huge cohort of Americans (26% of the total U.S. population are Baby Boomers) will dramatically change the composition of the country. Currently, just 13% of Americans are ages 65 and older. By 2030, when all members of the Baby Boom generation have reached that age, fully 18% of the nation will be at least that age, according to Pew Research Center population projections."
Take care,
Catch
Morningstar, Day One: "the role of high quality fixed income is not to make you money" Reply to
@BobC: Thanks Bob. I very much respect your comments. My income side right now consists of an index fund that mimics the Barclays U.S. Aggregate Bond Index, plus managed funds MWTRX, LSBDX and FGBRX. I also have in this bucket RPSIX, which I know at this point has ~14% income oriented equities. All the managed funds have allocation risk, but pretty good management behind them.
Your comments on balanced returns is interesting and believable, but somewhat depressing. Five years ago, I can remember inputting 8% return into those
retirement calculators. Recently as I get closer to
retirement, likely by my employers call, I've been using 6% as a factor. Your 4-5% is probably a better factor to use in planning, just to be safe rather than sorry.
Thanks for the input.
Morningstar, Day One: "the role of high quality fixed income is not to make you money" Reply to
@MikeM: Mike, I agree that you re-think your long-term expectations for both bonds and stocks. We tell our clients to expect 2-4% from bonds over the next 10 years, and 8-10% for stocks, with an average 60stock/40bond return of around 5%. This could very well be too low, but when we use 4-5% in our
retirement income projections, we would rather be using conservative assumptions. And if you consider that we have been in a 30-year bull market, declining interest rate environment for bonds, it seems only logical to assume returns will be lower going forward. So your lower-expectation comments are right on. But 2-4% seems pretty good, knowing that some funds will do much better, while others will struggle to break even. And, yes, I agree that some risk in bonds is worth taking. But that is not the case for every investor. Many bond investors would prefer to have NO risk to principle, but they don't think about interest rate risk and inflation risk and how they can negatively beat up their bond portfolio. But I'm with you...give me Fuss/Gaffney and Hasenstab just about any day.
Morningstar, Day One: "the role of high quality fixed income is not to make you money" Howdy Mike,
You noted: " As part of a balanced portfolio using bonds to lower volatility, don't you have an expectation for returns?"
I believe to understand that her statement leans towards current protection during erratic equity markets. One would suppose to the point, that even if yields in IG bonds don't move around too much, that the monies would be fairly liquid and at least retain value. If she is more of a "bond" person, she may be seeing more rough equity waters ahead.
I will note, not that others are not unaware of or have not seen this during conversations among those on tv and in article writes; that, there are those in the equity and the bond worlds of investments that do not cross the lines of what they see and find to be correct going forward. Mostly by chance, I have heard the answer to the question; "Do you invest in "x" at all?" Reply, "No, I don't invest in equities or bonds."; depending on the person's leanings for investments. Both worlds will product excellent profits if the person is skilled and especially if they use the other tools available to "adjust" their holdings.
Our house had been a 90% equity house from 1979, until June of 2008. The transistion among the equity bumps here and there (March 2009-today) to bonds has been an interesting journey. The transistion may have happen to some extent; as retirement is just around the corner, but avoiding most of the market melt and moving to bonds opened the door much sooner.
At the very least, we have become more diversified in our knowledge and thinking about investments.
The big work is picking apart the numerous sectors that are the equity and bond worlds; and finding the comfort zone of blend for the risk and reward.
Note: our cash is in bond funds, versus MM accts. And we do expect to earn a few bucks from any of our bond fund holdings.
Take care of you and yours,
Catch
Why David Herro is Betting Big on Europe http://finance.fortune.cnn.com/2012/06/14/retirement-guide-herro-europe/?iid=SF_F_LeadThe vaunted international stock picker David Herro is betting big on banks in France, Spain, and Italy. But he doesn't call himself a risk-taker.
FORTUNE -- David Herro seems awfully relaxed for a man who has more than $1 billion invested in European banks. It's a sunny morning in late May, and I'm sitting across from the boyish 51-year-old fund manager in his downtown Chicago office. He's giving me his full attention, but I can't stop glancing at the headlines blinking on the Bloomberg terminal behind him. The euro is about to hit a two-year low. Greece is on the brink of disaster. Spain's real estate market is in shambles, and Italian sovereign debt is as fragile as stained glass. The global economy is roiling, and Herro is positively beatific.
"Eventually they're going to get these problems solved," he says. "If you look at the economic history of the world, problems come and problems go. There are problems, and they do have to be dealt with. And our view is that all these problems are manageable."
FutureAdvisor...free retirement portfolio tool Hi, bee.
Walked through it. The software concluded that both the hypothetical investor (Robin) that Junior and Johanna used in this month's "Best of" column and I are in deep doo-doo. Robin needs to save $1100/month and I need to park away $2600/month. It might be right, but it's virtually alone in that judgment.
I'll note that the site doesn't account for Social Security benefits (at least not in any visible locale) and its rate of return assumptions ("we use 5th percentile value of annualized returns of the S&P 500 over 30 year periods" - basically, it assumes a permanent bear market) strike me as untenable.
I'll flag this site for J & J to look at as part of their impending update of the retirement calculators piece.
For what it's worth,
David
