Guest post by Larry Fleeman
Are You Leaving Money on the Table with Low Returns?
The Wall Street Journal calls it “The New Era of Low Stock Returns.”
Economist Robert Shiller explains that stocks are now so overvalued that he expects average annual returns of only 2.5% (after inflation) for the next decade. And this doesn’t even include fees and taxes.1
Investment manager William Bernstein said in the WSJ article “The problem isn’t that you might be not able to get better than a 2% return, but that even getting 2% isn’t going to be psychologically easy.”
And it gets even worse. Using Professor Shiller’s 2.5% return data, a typical investor’s “balanced” portfolio, consisting of a 50-50 mix of stocks and bonds, will produce an abysmal 1.4% return before fees!
Can you retire on 1.4% returns?
High Fees are the Nail in the Coffin for Wall Street
Wall Street is adding insult to injury by charging fees that are approaching or exceeding stock market gains.
According to US News & World Report, when adding up the fees for mutual funds (including hidden fees), they will total 4.52% for a taxable account and 3.52% for a tax-deferred account.2 Because those fees are compounded every year, they take a big chunk from your retirement savings: in their example, a $10,000 investment over 30 years will lose a whopping $508,000 to mutual fund fees!
Those fees amount to a net loss of 1 to 2% annually.
With fees that high and low returns for the foreseeable future, you’ll be paying Wall Street to lose your money.
Unless you choose not to.
Beat Wall Street with 10% Returns
Wall Street likes to pretend that they are the only game in town, but things are changing.
Recently, congress enacted 2 new laws that give YOU, the investor, an edge that was previously unavailable.
One of those new laws is the JOBS Act, or “Jumpstart Our Business Startups” Act, which was passed in 2012.
So what does the JOBS Act mean to you and your retirement?
In the past, government regulations made it very difficult for new businesses to raise equity. Because of this, investors had very few choices for investments in new businesses and were limited mostly to risky, run-of-the-mill Wall Street investments with not-so-great returns and fees that erode portfolios.
But with passage of the JOBS Act, it opens a whole new door of opportunity in what is best described as Private Free Markets (PFM). Since private businesses are responsible for most of our economic growth, it only makes sense to allow investors to cash-in on this mostly-untapped resource.
How Private Free Markets Help You Win
While Wall Street flounders under ever-increasing government regulation, Private Free Markets are growing and thriving.
You may not be aware that markets do best without government interference and regulation. Free markets allow the best to thrive, while the less competitive businesses will fall by the wayside. In other words, Private Free Markets are good for business and good for you, the investor.
Private Free Markets are simply a way for most investors to invest directly with a business startup, cutting out the middlemen and their fees.
This is a win-win, because not only does it reduce costs for the business startup, it also reduces costs to investors and in turn often results in higher returns. It is not unusual to see returns of 10-15% or even more. Compare this to the stock market’s expected returns of 2.5% over the next 10 years and you can see that Private Free Market investments offer an opportunity for double-digit returns and higher profits than the usual tired fare offered by brokers.
Now I know this isn’t for everybody. If you are not open to learning, this probably isn’t for you. But if you are willing to put in some time and effort to get better-than-average returns, take a look here and see for yourself.
Dumping Wall Street may be the most profitable move you make all year. As things change you can see how making a simple choice can mean the difference between years of losses or double-digit gains.
The choice is yours.
The JOBS Act is only one new law that benefits investors. To see more about how this and another new law will benefit you personally and add millions to your portfolio, take a look by clicking here.
Larry Fleeman is a contributor for Solo401k.com.