We're witnessing 'the death of investment'
Lucy Nicholson/Reuters
Andrew Lapthorne, head of quantitative analysis at Societe Generale, thinks that this model is dying.
The strategist not only pointed out some worrying trends in current global markets, but also laid out the slow demise of long-term investing in a note to clients on Monday entitled "The death of investment."
In the note, Lapthorne tracks the 20-year return for a portfolio consisting of 50% global stocks pegged to the MSCI World index, 40% government bonds, 5% cash, and 5% corporate bonds with an initial investment of $100,000. In his opinion, for buy-and-hold investors who are trying to generate money for retirement "the outlook is dire."
"If you invested today for 20 years the after cost excess return might be $21,800 (today's yield on a balanced portfolio is just 199 [basis points] minus 100 [basis points]) versus $60,000 if you invested 10 years ago - and a $150,000 30 years ago," wrote Lapthrone.
Basically, the amount of money that investors can expect to make from their nest egg has been deteriorating over the past 30 years, and the trend doesn't look to improve. Lapthorne highlighted this in a chart showing the returns over time, and it's moving in an ugly direction.
This is a big deal for anyone who has a hope of retiring. Lower nominal returns means that people have to work longer or invest in riskier assets to generate the amount of cash needed to live through retirement. The lack of returns has even been termed a "retirement crisis."
As there always are, Lapthorne included a few reasons why this may not be as bad as it looks.
"Of course inflation rates are much lower today than they were 30 years ago and trading and management costs are coming down," said Lapthorne.
Both of these are important, as inflation erodes the value of returns over time and, as we've noted before, fees can have a serious impact on return so declining fees shouldn't be ignored.
Regardless of these hedges, Lapthorne asserts that there is only one conclusion any reasonable person can come to.
"But you can't escape the obvious conclusion: those with large nominal liabilities are going to have to find more money."
- US buys 81 Soviet-era combat aircraft from Russia's ally costing on average less than $20,000 each, report says
- 2 states where home prices are falling because there are too many houses and not enough buyers
- A couple accidentally shipped their cat in an Amazon return package. It arrived safely 6 days later, hundreds of miles away.
- 9 health benefits of drinking sugarcane juice in summer
- 10 benefits of incorporating almond oil into your daily diet
- From heart health to detoxification: 10 reasons to eat beetroot
- Why did a NASA spacecraft suddenly start talking gibberish after more than 45 years of operation? What fixed it?
- ICICI Bank shares climb nearly 5% after Q4 earnings; mcap soars by ₹36,555.4 crore
- Nothing Phone (2a) blue edition launched
- JNK India IPO allotment date
- JioCinema New Plans
- Realme Narzo 70 Launched
- Apple Let Loose event
- Elon Musk Apology
- RIL cash flows
- Charlie Munger
- Feedbank IPO allotment
- Tata IPO allotment
- Most generous retirement plans
- Broadcom lays off
- Cibil Score vs Cibil Report
- Birla and Bajaj in top Richest
- Nestle Sept 2023 report
- India Equity Market