On The Crash Proof Retirement Show, Phil Cannella and Joann Small regularly discuss the money that upfront fees and ongoing expenses take out of your Wall Street investments. It’s a serious problem—Dalbar Corporation found the average investor in mutual funds has made only 3.7% annually over a 30-year period ending in 2013—but in that same 30-year period, the S&P 500 made over 11% annually!
But soon, the idea of making 3.7% in a year through your mutual fund could be a dream come true. According to a recent article in The Wall Street Journal, many experts believe we’re entering a period of time where investors will be lucky to make 2% per year from a typical portfolio of stocks and bonds.
“2 percent a year? Is that a good reward to risk your principal?” asked Phil Cannella. “It’s a bleak outlook for Wall Street without federal stimulus.”
In a world of smaller stock market returns, those aforementioned fees and ongoing expenses loom much larger. The 30-year study shows what happens to your money when the market makes 11%—but what if the market only made half that? What if it struggled to break even?
According to research by Robert Shiller, an economist from Yale University, based on current market conditions a portfolio of 50% stocks and 50% bonds will lead to a yield of between 1.4% and 1.9% per year over the next decade, after adjusting for inflation.
So the real question: are those measly gains worth it? Why risk a market downturn of 20%, 30% or more just for the prospect—the possibility—of making 2% each year?
Robert Shiller is not alone. Many experts have acknowledged the current stock market bubble. They are cautioning investors and bracing for the next crash.
We urge you to weigh your options:
- Hope for 2% gains and risk 20%-70% of your investments?
- Or protect 100% of your investments and maintain growth with the potential for double-digit returns?
Once you’ve made your choice, register for the next Crash Proof Retirement educational event where Phil Cannella and Joann Small will educate you on the safe alternatives to market risk and ongoing fees.