Rewriting the Golden Rules of Retirement Investing
Many are holding more cash as they’re scared, observes Fisher of Summit Advisors, adding that such individuals tend to gravitate towards safer bets like insurance products with guarantees or principal-protected investments.
“That’s been growing like wild fire in the last 10 years. You have principal protection plus potential growth,” he says. “You don’t get killed on the downside.”
For Pactolus Private Wealth Management, a typical client portfolio has 30-50 percent in assets that provide short-term liquidity.
Pactolus' Harter says the firm's strategy also includes looking at multiple global currencies as a means of attaining secondary liquidity.
The firm also invests in other asset classes, such as direct multi-family real estate investment trusts, REITs.
Revenue growth in that sector is expected to hit 4-6 percent this year, according to a report in REIT.com , citing research by SNL Financial, with funds from operations projected to grow at least 9 percent during the period.
Approximately 3 million households have “doubled-up” since 2008, and many of them will be looking for their own place to live as the job market improves, another REIT.com report stated, suggesting further upside potential for the multi-family REIT sector.
As a secondary inflation hedge, Pactolus has been buying up farmland, primarily in northwest Missouri, which has appreciated 8 percent in recent years, says Harter.
“This the ultimate inflation hedge — better than gold and silver,” he says. “Gold and silver will, in the shorter term, be traded like other risk assets.”
Retiring Is Risky Business
For those looking to add alternative asset classes and/or shift a higher percentage of funds into equities, wealth managers say it's more important than ever to understand one’s appetite for risk.
The roller-coaster patternof the stock market since the spring of 2011 is ample cause.
“People tend to put investment policy before risk,” Harter says. “Start with risk. Start with the end in mind and the minimum amount you need.”