The Next 10-Year Investment Battle: What to Expect

The past decade in investment performance across equities have rewarded investors greatly. While there have been a few bumps in the past (namely the pandemic), if you remained in the market, the rewards themselves should be evident. Below is a convenient chart by Dimension Fund Advisors detailing 5-year and 10-year annualized investment performance by asset classes:

As terrific as these returns have been, one should take heed that expecting this investment trend to continue over the next 10 years may not be as realistic as one would hope. While it is possible that this trend could continue, historical averages over the past century indicate this past 10-year trend has been better than average and may regress to the mean at some point in time. This is not to say that the market will underperform soon but expecting the unexpected when it comes to market performance is what makes astute investors resilient.

With all this in mind, there are a couple recommendations to consider for the next 10 years:

Review Your Portfolio Allocation

In the past 10 years, has your level of risk (e.g., mixture of equity/fixed income…50/50, 60/40, 70/30 etc.) remained consistent? If not, it is likely that recent performance may have increased your equity exposure in your portfolio allocation. Making sure that fixed income is at a healthy level can help dampen the volatility on the equity side. One should always revisit this topic to ensure everything is in line with your risk and especially your goals.

Review Your Financial Plan

Most retirees rely on their portfolios to fund their retirement living expenses (and other goals). Having & reviewing a financial plan to balance the appropriate amount of risk to your financial goals is invaluable. Preparation and expectations comprise a majority of what a financial plan can do for you.

Conclusion

It is possible that a downturn could be in store for us in these next 10 years. While the statistics are in your favor if you remain invested, consulting with a fee-only financial advisor can help you prepare and weather for what could come.

Weingarten Associates is an independent, fee-only Registered Investment Advisor in Lawrenceville, New Jersey serving Princeton, NJ as well as the Greater Mercer County/Bucks County region. We make a difference in the lives of our clients by providing them with exceptional financial planning, investment management, and tax advice.