Let's start with a few core ideas:

The tenets that underlie sound investment planning haven't changed. In equities, investors still want to participate in economic growth and steadily rising corporate earnings at attractive P/E ratios. In bonds, they want stable interest rate policies underpinned by sound fiscal, monetary and credit disciplines.
Some of your clients are focusing on goals that will require projectable amounts of investment funds a decade or more in the future. For example, we can estimate that the cost of a college education in 10 years will be about 60 to 70 percent higher than today. The cost of retiree health will be about 70 to 80 percent higher. Clients planning for such goals need reliable investment guidance through 2023.
Within a long-term structure, some clients may be satisfied to buy and hold while others will want to strategically adjust asset classes and investments. But there are risks in delegating strategic asset allocation to fund managers. As interest rates spiked in June and bond prices fell, managers of some large strategic allocation funds looked flat-footed. Their bond exposures were too big to manage in a kneejerk market suddenly impacted by millions of retail investors' redemptions. This event showed that:

For several decades, a "traditional" investment structure has been built on the stocks, bonds and currencies of the U.S. and Europe's developed markets. These markets paralleled the tenets of sound investment planning from the 1960s through most of the 1990s, and investors generally believed they would be stable and rewarding places to invest over time. In 1998, the investment volatility and uncertainty of these markets increased. The parallel began to fall apart, and that trend has continued for 15 years, to the present.

Instant Insights /

Investment planning 10 years out, Part 1

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