In our articles last week, Wayne and I opened up a big can of worms:
The retirement crisis.
As we showed you, the average retiree has next to nothing saved for retirement...
And nearly half of all Americans have nothing saved at all.
But now that we’ve identified the problem, it’s time to start finding solutions.
And this week, that’s exactly what we’re going to do.
Saving for Retirement Can Be Tricky
As Wayne showed you last week, saving for retirement can be tricky:
Even if you’ve managed to save some money over the years, taxes, commissions and inflation can literally cut your nest egg in half.
And with our Social Security program in jeopardy, it’s clear that we need to identify some new solutions to this crisis now.
In your comments to our articles last week (here and here), and in the emails you sent us (thank you for all your notes!), we were happy to see that many of you are already taking proactive steps to solve this problem.
But today we wanted to share a solution that you might not be thinking about…
A Dead Simple Solution for a Better Retirement
Perhaps the simplest solution to the retirement crisis is an obvious one:
Build a bigger nest egg.
Unfortunately, this is easier said than done. And if you’re close to retirement, you might not have much time.
So now I’ll let you in on a little secret:
This secret is one of my favorite strategies to help grow your nest egg rapidly.
The “Average Investor’s” Portfolio
It all starts with the portfolio you have now.
If you’re like most folks, you probably have some stocks, some bonds, and maybe a REIT or two.
Historically, a balanced portfolio like that has returned about 6% a year.
6% isn’t necessarily a “bad” annual return…
But if you didn’t start investing until later in life, or if you’re still recovering from the 2008 crash, it might not be enough to get you where you’re going.
With a return like that, you may have to delay your retirement—or worse yet, you may have to keep working indefinitely.
But one small change to your portfolio could have a big impact…
In fact, this one small change could help you double your overall returns.
Here’s The Secret...
As long-time Crowdability readers already know, historically, early-stage private equity investments have trounced the stock market:
As an asset class, early-stage investments have returned roughly 27% per year.
The thing is, there’s no need to re-arrange your whole portfolio just because you’d like to take advantage of those market-beating returns:
By adding just a tiny amount of private equity to your existing portfolio, you can dramatically increase your overall returns.
In fact, CNBC recently reported that this asset class gives investors like you “an easy way to nearly double the equity return that your 401(k) is generating.”
Here’s how the math works:
Let’s assume you have a portfolio worth $100,000.
If you earn 6% per year by investing in stocks and bonds, over 10 years, your portfolio would turn into $179,000. That’s a 79% return. Not bad.
But look what happens when we add some private equity…
We’re going to keep 90% of your assets ($90,000) in stocks and bonds. And we’ll put the remaining $10,000 into private equity.
At 6% per year, over ten years, the $90,000 would turn into $161,000.
But given the 27% historical annual returns of private equity, over 10 years, the $10,000 allocation would turn into $109,000.
So in total, your portfolio would now be worth $270,000. That’s a 170% return.
So a 10% allocation to private equity more than doubled your returns:
Your returns went from 79%... to 170%.
And a Solution for Retirees, Too
If you’ve got some time before you retire and some capital to invest, the strategy you just learned about is very powerful.
But what if you’re getting close to retiring, or you’re already retired?
Or what if you have very little money saved up—or even worse, what if you have no money saved at all?
Well, if that’s your situation, stay tuned.
Because Wayne has a solution for you….
And he’s going to tell you about it tomorrow.
Happy Investing.
Best Regards,
Founder
Crowdability.com
