Stefan’s weekly: Will we have enough to retire?

Dear Ladies and Gentlemen

Zero or close to zero percent Interest rates, equities markets going down, decreasing gross yields on real estate investments and longevity.

Ladies and Gentlemen, baby boomers may have to rethink their retirement plans.

You may think we know all that, but this is really important, now! Because knowing alone doesn’t help, it just doesn’t do the job considering most of us will agree upon the fact that knowledge that doesn’t change behaviour is useless and therefore we may need to change our behaviour or in this case investment behaviour. I have received so many mails from concerned readers of my weekly mails during the last three months, some were worried to lose their wealth, some questioned their investments and almost all were emotionally affected.

This, Ladies and Gentlemen, is normal human behaviour, nothing to worry about. Our ancestors needed such pronounced emotions to survive. It helped them not to become a snack for some hungry, ferocious animal. But today we don’t need these emotions to be as pronounced as 100’000 years ago and to see a personal portfolio go down by 10% or even 20% is in most cases, as unpleasant as it may feel, not a life-threatening experience. Volatility is just part of the game of investing and if you want to take out all volatility of your portfolio your return will most probably be negative as the cost of reducing risk down to zero is higher than the expected return from your investments may be. Therefore, especially during difficult times, i.e. very volatile markets, you should not lose focus and maybe avoid listening to all the negative voices around you, because they are either a) wrong for years or follow some b) unproven or c) outdated theory (most of the time a combination of all three of them).

Keep in mind what your investment goal is and if your investment goal is capital preservation over centuries, invest in assets that have a proven track record of keeping their value over the very long term like for example gold. But gold may be very, very volatile in the short to medium term and your life expectancy may be too short for you to appreciate the positive effects of gold. If you want to achieve very high investment returns in the short term, you will need to speculate and put (I deliberately avoid using the term “invest”) your money into highly volatile and risky equities, private equities, crypto currencies, etc., facing the risk to lose the entire “invested” capital. If you are willing not to be affected by the volatility of your portfolio but are happy to receive a cash return on your investments, you may want to consider a balanced equities portfolio of companies with a proven track record of being able of producing free cash flows even during not so perfect market conditions.
If you don’t want to see negative signs in front of your performance at any time, please do not invest whatsoever, rather spend your money or you will become your banker’s nightmare.

However, Ladies and Gentlemen, if you want to live through a long and healthy retirement age with some regular income stemming from your wealth and if you want to be avoiding eating up day by day more and more of that wealth, you may need to get accustomed to the idea of accepting volatility as an unavoidable variable.

All of us, Ladies and Gentlemen, must make sure not to overweight short term thinking too much and to let it influence our long-term investment strategies. It is always good to question investment strategies, but sudden changes and fear mostly lead to worse than expected results.

…and this brings me to the answer of the question in the title: “will we have enough to retire?”

Well, it entirely depends on you!

Please share your thoughts and ideas with me. Please feel encouraged to do so but please don’t forget (instead of hitting the reply button) to send your messages to:

smk@incrementum.li

Many thanks, indeed!

And now, Ladies and Gentlemen I wish you a great day and weekend!
Kind regards

Yours truly,

Stefan M. Kremeth