Americans are facing a "savings gap" and need an investment strategy with a "time horizon that is not a day, not a month, not even a year," BlackRock CEO Laurence Fink told CNBC Wednesday.
"We’re all going to live longer … and in the U.S. especially we’re not even prepared financially to finance the lifestyle we’re looking for," said Fink, whose fund manager firm has $3.5 trillion in assets under management. "We [at BlackRock] feel a responsibility to speak to this giant savings gap. We’re not thinking about the financial aspects of living longer."
With bonds and bank interest paying next to nothing, he said the "biggest risk for investors today is not whether the market goes up or down in the next week or next month. The greatest risk is investors not making decisions" and holding on to cash as a safe haven. But "there's a cost to owning cash," he said.
"Cash is risk-free but the cost of inaction may be far greater," he warned. "So if you're 42 years old and not investing for your retirement, that cost is compounded."
Different people need different strategies, depending on their tolerance for risk. Fink prefers only holding equities but others might find value in dividend-paying stocks or high-yield instruments. They may also want to look at alternatives such as real estate and hedge funds.
In equities, he likes the emerging world, where BlackRock has 40 percent of its business, but suggests those who don't want to invest in foreign companies put their money into U.S. multinationals including Honeywell , General Electric and JPMorgan Chase , particularly if they pay dividends.
CNBC Data Pages:
- Dow 30 Stocks—In Real Time
- Oil, Gold, Natural Gas Prices Now
- Where's the US Dollar Today?
- Track Treasury Prices Here
Disclosure information was not available for Laurence Fink or his company.