Life is changing, your portfolio too?
He has 10 good years left ... a colleague said the other day about a business partner. Why? He is in his mid-50s. Yikes! So am I! What comes next? Does it all go downhill then?
Okay, he certainly did not mean it the way it came across to me. Rather, he meant the years of good cooperation. Because in our minds, the age of 65 has become imprinted as a hard limit.
If you have been reading Gutmann Viewpoint for a while, you know what my personal goal as an investor is, to last as long as Warren Buffett (age 93) and his partner Charlie Munger (age 98). Both were true youngsters at 65 and were just starting to really warm up then. So please, I do not want to hear about “just 10 more years”.
Reduce in old age
These considerations are also important for securities investments. When my “last” 10 years in the working world actually begins, I will have to think about my 100% equity quota. Should I reduce it soon?
No way! Because my investment horizon is infinite. I took that decision a long time ago for my personal investments. My experience with it so far: it is liberating. The daily ups and downs of the stock market fade into the background and the success of the companies behind the stocks comes even more to the forefront. Does this also apply to you? What is your position on the subject?
Rethinking old wisdom
Many European investors have too low an equity quota. One of the main reasons: they think they will need some liquid assets in the next few years. Maybe they learned at some point that stocks are speculative and bonds are conservative.
Yet, I observe that often the entire invested assets of a client remain invested and unchanged for decades. It is not uncommon for it to even span generations. Not infinitely yet, but certainly long enough to endure a higher equity allocation. Woody Allen once said it very well: “Eternity is awful long time, especially towards the end”.
Perhaps pigeonholing helps. What dream would you like to fulfill, what sudden opportunity might you want to seize? This amount goes into the less volatile and more conservative bond category. What amount are you likely to never use up and need for a long time or never? This part goes into the stock category.
Another consideration: a company owner sells her life's work and suddenly has 10 million euros to invest. What should she do? She always had 30% in stocks and 70% in bonds before. Now the amount is higher and she thinks about 50% stocks. However, in conversation, it turns out that there is no scenario in which she will ever have a need of more than 2 million euros in her lifetime. She has her own property and an apartment on a nice lake. All without borrowed capital and additionally two apartments that she rents out. More real estate would only be a burden to her.
She has been running a company all her life and believes in the power of entrepreneurship. So why only 5 million euros in equities, should it not be 8 million euros? I do not have a conclusive answer to this question for you.
We think around the corner with you
It is precisely these different perspectives that should help you to better allocate your assets. It is not without reason that this newsletter is called the Gutmann Viewpoint.
Have you already started to think about it? Very good, talk to your Gutmann advisors in detail about your thoughts.