Larry Fink, chairman and CEO of BlackRock, warns that investors saving for retirement should get used to as little as a 4 percent returnfor the foreseeable future.
"It would be wrong to expect anything more than 4 percent or 5 percent at this time, if you're putting money to work today for long term," he told
CNBC.
"If you go into that without that assumption, you'd be wrong," said Fink, adding that the stock market alone should still return the historical average of 6 to 7 percent over time. BlackRock has about $4.5 trillion in assets under management.
The U.S. stock market could see "the beginning of another leg of a rally" if Britain votes this week to stay in the European Union trading block, Fink predicted.
BlackRock on Monday upgraded its short-term view on U.S. Treasurys and fixed-income overall to neutral, while remaining cautious on risk assets ahead of the Brexit vote, CNBC reported.
"If the U.K. votes to stay, I do believe there has to be policy responses," Fink said. "I'm under the belief now that the government [there] is aware that this anger is real. And if they don't respond to this anger it's going to get worse."
Meanwhile, conventional investment advice says to gradually shift money from stocks to less risky bonds as retirement age approaches.
Not so fast, says Eric D. Nelson, an investment adviser and founder of Servo Wealth Management.
“For an individual or family who is about to retire or is already in retirement and who needs a rising income stream over several decades, putting most of your money in a diversified portfolio of stocks represents your best chance for success,”
he writes in a Seeking Alpha blog that compares the “lost decade” for the S&P 500, whose value fell from 2000 to 2009, with diversified asset allocations.
The key to growing a retirement portfolio is to look beyond the biggest U.S.-listed companies that make up the S&P 500, he says. Stock holdings need to be diversified to include smaller-cap companies and foreign equities.
“The decision of not only how much you allocate to stocks but also what stocks you own has never been more important,” he says. “Start with a portfolio that emphasizes equities, diversify them broadly, stick with your plan and you just might avoid seeing a lost decade destroy your retirement.”
(Newsmax wire services contributed to this report).
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