Strategies for Investing $1 Million Over the Next Decade, According to Experts
Investment advisors and wealth managers are predicting that the next 10 years will differ significantly from the past two decades for investors. Charles-Henry Monchau, the chief investment officer at Swiss private bank Syz, warns against making long-term decisions based solely on recent history and urges investors not to extrapolate too much from it. Monchau believes that inflation, in contrast to the past two decades, is likely to remain higher for a longer duration due to commodity supply shortages, reshoring of production by companies, and labor shortages in critical jobs resulting from demographic changes. These conditions could lead to increased volatility and lower returns for assets that have performed well in the past decade.
Investment Approaches for Long-Term Investors
Monchau advises long-term investors to have a significant portion of their portfolio in global equities. He suggests that being invested in equities is the best approach for those with a long-term time horizon. Additionally, to combat higher inflation, Monchau recommends three alternative options beyond stocks and bonds. First, he suggests being more "nimble" with asset allocation between stocks and cash. Second, adding assets like real estate investment trusts (REITs) and commodities that can potentially act as hedges against inflation. Third, allocating a portion of the portfolio to illiquid alternative investments, which may offer higher returns in exchange for limited liquidity over extended periods.
Accessing Previously Restricted Private Markets
Monchau highlights European Long-term Investment Funds (ELTIFs) as a way to access previously restricted private markets. However, he cautions investors that their money will not be readily available for withdrawal. ELTIFs enable individual investors to invest alongside institutions in assets such as infrastructure, private equity, and private credit. Monchau suggests allocating up to 50% of a portfolio to several of these vehicles, emphasizing that they are not meant for high recurring returns like venture capital funds or early-stage growth ventures. Instead, these products offer low-risk, highly diversified options that target low double-digit returns.
Portfolio Diversification and Income Generation
Monchau advises investors to allocate to other asset classes, such as fixed income, to achieve portfolio diversification and a regular income. Jamie Cox, a financial planner at Harris Financial Group, expects international stocks to outperform U.S. stocks in the coming decade due to changing market dynamics influenced by rising rates and inflation. Cox suggests focusing globally on high dividend stocks in sectors like consumer staples, telecoms, and energy to generate income. He recommends companies like Unilever, Nestle, Crown Castle, American Tower, and Broadcom as potential investments. Cox advises younger investors more than 10 years away from retirement to consider a 100% equity portfolio, maximizing returns with low-cost index ETFs. He suggests investing in actively managed funds only when seeking dividend income during retirement.
In conclusion, investment experts recommend adjusting investment strategies for the next decade. Long-term investors should consider a significant allocation to global equities while being mindful of potential inflation. Accessing previously restricted private markets through vehicles like ELTIFs may offer diversification and moderate returns. Additionally, portfolio diversification and income generation can be achieved through high dividend stocks and other asset classes. It is essential for investors to carefully analyze their risk tolerance and long-term goals when implementing these strategies.
Investment Strategies and Their Impact on New Business Formations
As the investment landscape evolves over the next decade, new businesses must adapt their strategies accordingly. Experts like Charles-Henry Monchau, the chief investment officer at Swiss private bank Syz, predict a shift from the trends of the past two decades. Monchau warns of higher, longer-lasting inflation due to commodity supply shortages, reshoring of production, and labor shortages in critical jobs.
Global Equities and Inflation
Monchau advises long-term investors to hold a significant portion of their portfolio in global equities. For new businesses, this could mean a shift in investment strategies to align with this approach. However, with the potential for higher inflation, businesses may need to consider alternative options beyond stocks and bonds. This could involve being more flexible with asset allocation between stocks and cash, adding assets like real estate investment trusts (REITs) and commodities as potential hedges against inflation, and considering illiquid alternative investments for higher returns.
Exploring Previously Restricted Private Markets
Monchau highlights European Long-term Investment Funds (ELTIFs) as a way to access previously restricted private markets. For new businesses, this could open up opportunities for investment alongside institutions in assets such as infrastructure, private equity, and private credit. However, businesses must be aware that their money will not be readily available for withdrawal.
Diversification and Income Generation
In addition to these strategies, experts recommend diversifying portfolios and focusing on income generation. Jamie Cox, a financial planner at Harris Financial Group, suggests focusing on high dividend stocks in sectors like consumer staples, telecoms, and energy. For new businesses, this could mean exploring investments in companies like Unilever, Nestle, Crown Castle, American Tower, and Broadcom.
In essence, the evolving investment landscape calls for new businesses to adapt their strategies. They must consider a significant allocation to global equities, explore previously restricted private markets, and focus on diversification and income generation. As the next decade unfolds, these strategies could be key to their success.