Its the title of an article by Picet. Here’s the link
Most people have some form of balance in their investment portfolios. But what if the balance you take, doesn’t make you any money?
This article by Picet was written in 2018. Has much changed since then? One could argue it may be worse.
“Over the last five years a 50/50 equity-bond portfolio has returned 5.3% a year but this will fall to -0.1% over the next five years on Pictet’s estimates. This is a challenge investors have,’ said Pictet chief strategist Luca Paolini. ‘Five-year real return on a 50/50 portfolio falls to zero over the next five years. Over 10 or 20 years it would be closer to 2%, so half the return seen in the last five years. Forget about 5% returns.”
What doesn’t get talked about are costs of managing wealth. Why? Because they are different. Here’s the big issue. If Picet were right, and a 50/50 portfolio will see returns at less than 5%. If you use wealth managers such as St James Place (SJP), their ongoing cost is around 2% ( In fact Grant Thornton estimate ongoing costs to be 2.4%). That means half of your expected return ends up in the wealth managers pockets. Is that fair?
But don’t imagine its just SJP, the ongoing costs by wealth managers can easily top 2% when all the costs are taken into account. Perhaps its time to rethink how you manage your money and with whom you choose to use? If you don’t, your 50/50 portfolio may not make you any real return!