The investment landscape is complex. It is important to have a plan that helps you navigate the opportunities and challenges that may affect your investments in the years ahead.
One of the key drivers behind investing over time is the power of compounding. Compounding occurs when the original investment grows over time from the reinvestment of interest and dividends. This can help you reach your financial goals sooner rather than later.
A number of long-term trends are appearing to influence investment returns and risk over the coming decade. These include increased volatility and less reliance on central bank support.
The growth of the private markets has also been driven by the growing size of larger organizations dedicated to those investments, with firms like Blackstone, KKR and Brookfield collectively managing around $2.5-trillion US in assets. Their scale provides them with economies of scale that can drive lower costs, more focused operational expertise and access to a wider array of value enhancement strategies.
Lastly, we are starting to see signs of an inversion of the traditional relationship between rising interest rates and declining bond prices. Historically, higher interest rates have pushed down yields on safer investments like savings accounts and Treasury bonds. This can cause reinvestment risk when those investments are maturing, but as interest rates decline the same cash flows that caused yields to rise tend to drive bond prices lower. This can improve the potential return for investors in sectors that were hurt by higher interest rates, such as real estate investment trusts (REITs).1