Think Local First

Main Menu

  • Home
  • Disarticulation
  • World Trade Organization
  • Social benefit
  • Automated Teller Machine
  • Bankroll

Think Local First

Header Banner

Think Local First

  • Home
  • Disarticulation
  • World Trade Organization
  • Social benefit
  • Automated Teller Machine
  • Bankroll
Bankroll
Home›Bankroll›GameStop proves diversification is the key to future retirement savings

GameStop proves diversification is the key to future retirement savings

By Loretta Hudson
March 9, 2021
0
0
  • Eric Satz is the Founder and CEO of Alto, a Nashville-based financial technology company that helps individuals access and execute alternative asset investments online using IRA and 401 (k) accounts.

Like many of you, I reflected on what we saw in public markets as the GameStop story unfolded. Recent headlines highlight a growing power shift in the current financial landscape between Wall Street and Main Street. While market manipulation has always been part of the game, the dynamics of this manipulation are changing. The structural flaws in our public market system, long visible to some, are now magnified for all to see.

Beyond the noise of the headlines is this most important point: more than ever, the doors to true wealth creation are open to everyone. We must stand up for the accessibility that allows people of all income and all walks of life to invest as they see fit in their financial future.

The ‘set it and forget it’ mentality no longer holds

In this Jan. 28, 2021 file photo, pedestrians walk past a GameStop store on 14th Street in Union Square in New York's Manhattan neighborhood.

Historically, the average person has approached retirement with a ‘set it and forget it’ mindset, relying on traditional financial institutions to invest in stocks and government bonds. Here’s the hard truth: The 60/40 public equity / bond portfolio approach to financial health and stability will only bring poverty and indignity to tens of millions of Americans over the next 30 years. . Why? Because the value of the dollar depreciates; we are living longer than expected; and we cannot count on annual public market returns of 6-8%. This is why so many pension funds no longer exist, and many of them are seriously underfunded or on the verge of bankruptcy.

Hear more voices from Tennessee:Receive the weekly opinion bulletin for insightful and stimulating columns.

According to Hendrik Bessembinder’s 2018 article “Do stocks outperform Treasuries? in the Journal of Financial Economics, if over the next decade stock returns approach their historical averages, we can expect a negative return of 2.6%. Over the next 20 years, 1.2%.

So what is the solution ?

Diversification is essential

Portfolio diversification is the most important financial tool for reducing volatility while increasing returns, and investing in alternative assets is the most effective way to diversify. On average, we have 2% to 5% of our portfolios in alternatives, from private equity and real estate to loans and cryptocurrency. Professional investors, on the other hand, have around 25-50% invested in alternatives. In order to generate the returns needed in retirement, the average investor cannot afford to rely solely on the public markets. They need to diversify like the pros do.

Take control of your financial future

In the United States, $ 33 trillion is held in retirement assets, but only 2-5% of that amount is in alternatives. This is not all that surprising, given how inaccessible, expensive and endlessly frustrating the process of investing retirement funds in alternatives has been. But this is no longer the case. Thanks to new technologies, it is now easy and inexpensive to access opportunities and use retirement funds to invest in alternative assets that effectively diversify your portfolio.

Eric Satz

The conventional wisdom to be cautious about investing for retirement is as strategically flawed as the old 60/40 rule. It makes a lot more sense to invest an appropriate percentage of your tax-advantaged retirement funds in illiquid alternative assets that have the potential for disproportionate returns, as you can’t touch them until retirement without penalty anyway. Likewise, an individual retirement account is ideal for investing in long-term alternative assets as they can grow, tax-free, throughout your working years.

It’s time to rethink our approach to investing for retirement. We need to think with an active and investing mindset, rather than the passive and saving mindset of yesteryear. Doing this has the power to secure and enhance not only our retirement years, but the entire trajectory of our working life.

Eric Satz is the Founder and CEO of Alto, a Nashville-based financial technology company that helps individuals access and execute alternative asset investments online using IRA and 401 (k) accounts.

Related posts:

  1. Non-bank loans instantly the place they lend even and not using a register
  2. Repurchase of loans: Who obtains a grouping of credit?
  3. Gold mortgage: options and greatest banks
  4. Non – credit score installment mortgage
Tagslong termunited states

Categories

  • Automated Teller Machine
  • Bankroll
  • Disarticulation
  • Social benefit
  • World Trade Organization