As my clients approach retirement many ask me about reducing the risk in their portfolios. This article explains why we all need a significant allocation to equities in our retirement portfolios:
If you’ve ever wondered why I include the articles and opinions of Warren Buffet in this newsletter – it’s because he knows what he’s talking about and his track record is the proof. Buffet heads – the conglomerate Berkshire Hathaway owns the shares in the businesses he has purchased over the last three decades. Companies like Coca Cola, Wells Fargo, American Express, and Wal-Mart.
The interesting thing is Berkshire Hathaway experienced the same declines all of us did during the 2008-2009 Financial crisis. The difference is they did not lose faith in equities. This article gives you the numbers:
The 6 month return on the S&P TSX is 10.4% to January 31st and the three year cumulative growth rate is over 27%! Given that volatility is necessary for us to receive the premium returns equities give us – expect a decline at any time! Call it a pull back, pause, temporary decline, or a correction. Stock markets are voting machines in the short term and value machines in the long term – short term market movements can be emotionally driven and we could experience a market decline at any time as investors take short term profits.