Money Management, Retirement Tips of 2 Senior Investors



This is one of the things that everyone who has thought about retirement knows: the youngest are expected to invest in stocks, and the majority of seniors should hold bonds.

But two of the most respected wealth managers in the country say it's a bad approach.

The objections come from Jeff Erdmann, who topped Forbes' list of top wealth managers in America in the last three years, and Peter Mallouk, whom Barron named no. 1 independent wealth management advisor on four occasions since 2013.

Both are very positive about stocks as long-term investments. This partly reflects their focus on wealthy families and the maintenance of a wealth that can last generations. But their concerns about the traditional strategy also have major implications for ordinary investors and all those who have a 401 (k).

The classic idea for retirement investments is that young people need to have high-growth assets, such as equities, and over the years, they must gradually become more cautious in order to obtain a flow of money. regular income and protect against heavy losses. The non-traditional answer?

"You should throw this philosophy out the window," Erdmann said during a phone interview with Business Insider.

Erdmann, who works for Merrill Lynch's private banking and investment group, says investors are getting so low yields on bonds, CDs and similar assets that they can not rely on them anymore. as they had done when this conventional idea was established.

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For example, the yield on the 10-year Treasury Note was above 10% in 1985, but had not reached 5% since the beginning of 2001. Markets were scared last year when the 10-year yield was briefly "exceeded" above 3%. Other conservative investments also do not offer the kind of returns that they have achieved in recent decades.

"Whether you are 88 or 18 years old (with) where we are in the interest rate cycle, your asset allocation will not necessarily be very different," Erdmann said.

This has contributed a lot to the bull market of ten-year stocks: more conservative options have simply not appealed to many people for many years. And we do not know if that will change soon.

While Erdmann 's objection to the traditional retirement strategy is based on the modern environment of easy money and low interest rates, Peter Mallouk of Creative Planning, based in Kansas City, says that he does not think this strategy has ever been a good idea.

"The way the industry selects portfolio management … does not make sense," he said. "It never made sense."

Mr. Mallouk runs a $ 39 billion company that was named by Barron's best independent wealth management firm in 2017. He told Business Insider that age is almost not relevant for investment in retirement.

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In his opinion, the only thing that really matters is the needs of the investor. A well-off young person with fewer needs can make prudent investments, and a senior who is lagging behind in retirement savings needs to be more aggressive.

Mallouk said the traditional investment philosophy could leave retirees without money enough money to support themselves later in life.

The two points of view have different implications: if you agree with Erdmann, you might conclude that investing more in bonds as you age makes sense in the event that yields rise significantly in the future . But if you stay with Mallouk, you focus more on stocks, even in retirement.


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