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Why Americans Don’t Own As Much Stock As They Used To

By Posted on In Economy, Finding Confidence, Investment Strategies, Uncategorized

At first glance, the trend of stock ownership in the US is quite declining.  It appears that for most Americans, the percentage of stock in a portfolio is less and less.  That’s scary… but there is more to this story than just another post about investors sitting in cash.

How much stick do investors own

 

What explains the declining ownership of stocks? In part, it’s the following:

  1. It’s a lack of confidence in the market. Fear of another recession or another bear market. That’s not new.
  2. Over the last 10-15 years, there have been a lot more products and asset classes available that simply weren’t available in the 60s, 70s or 80s. There are now more investment options than ever before available to investors.  Stocks and bonds are no longer the only game in town.
  3. Americans (and Europeans, and Japanese) are aging and becoming more conservative with their investments.

 

The Illusion of Wealth

By Posted on In Retirement, Uncategorized

What’s worth more to you: a lump sum of $100,000 or an income stream of $500 per month?

If you’re like most investors, you would pick the $100,000 as being worth more.  In reality, $100,000 can buy an income stream of about $500/month, which means they are worth about the same.

It is much easier for investors to understand what $500 a month can buy versus $100,000.  Investors do not deal with those large numbers on a frequent basis and mistakenly overvalue it causing an illusion of wealth.  It seems like $500/mo is a lot less, but it’s not.

Because of these misperceptions, it’s important to continue to plan for retirement and how the various scenarios might unfold.

 

Power of Innovation (Follow Up)

By Posted on In Economy, Finding Confidence, Uncategorized

American Funds recently wrote about innovation from a different angle than from my original post: the benefit to the innovative company.  Here are a few highlights:

“The markets often underestimate the impact innovation can have on a company’s growth prospects and future cash flows” – Steve Watson, Portfolio Manager at American Funds.

The technology industry is not the only area investors should look toward for innovative companies.  They can be found in some of the most stable industries.

Thomson Reuters tracks the top 100 Global Innovators and found that spent over $223 billion on R&D but their aggregate performance beat the S&P 500 by 4%.

At the end of the day, innovation is affecting our daily lives.  It has changed the way we shop (e-commerce), the way we communicate (smartphones), and the way we use energy (LED light bulbs) to name just a few. And if that’s not enough, investing in innovative companies may have a positive effect on your portfolio.