Invest for the generations of the future
MORE Australians are set to look beyond their own lifetimes when it comes to investing.
Forget 10 years for shares or real estate assets, or even 40-50 years for superannuation; a 100-year outlook may become a new standard in long-term investing. But is it something that suits you?
William Buck’s director of wealth advisory, Adrian Frinsdorf, said 100-year investment strategies were used by large institutions such as churches, universities and schools, but were also being adopted by individuals.
“With high net worth investors … 100 years can be a relevant time frame,” he said.
“These investors generally have their own financial position well sorted, but are more interested in generating and protecting the wealth for future generations, including grandchildren not even born.”
Mr Frinsdorf said some investors’ decisions were made to deliver benefits beyond their lifetimes. “One popular strategy is to establish family trusts that can help fund future secondary or tertiary education,’’ he said.
Mr Frinsdorf said wealthy investors were most likely to adopt 100-year plans but they could be undertaken by anyone and typically focus on growthoriented assets. “What happens within the global economy over a year may not have an impact over such a long term.”
Growth assets such as shares and property have historically performed the strongest over many decades. However, if a 100-year investment time frame seems too big a stretch for you, it’s still worth thinking longer term than you previously might have.
Medical advances are pushing lifespans further, and today’s retirees are more active than earlier generations – meaning they spend more money.
Planning for Prosperity senior financial adviser Bob Budreika said it was now common for at least one member of a couple to live into their 90s.
“Be aware that your life expectancy could be considerably more than what you anticipate it might be,” he said. Mr Budreika said investments should not be planned in terms of years, but in terms of what you wanted them to achieve.
“What’s the point of saying 100 years or 10 years, unless you have a clear objective?” he said.
“Unless you have a purpose for your investing, it becomes a fuzzy objective.”
Some investors might want to leave an estate for future generations, but not all of their investments need to have extra-long time frames, Mr Budreika said. “If people can compartmentalise their savings, I think they can achieve a better outcome.”
Many retirees today split their wealth into three categories: ● A few years of income needs in safe cash savings. ● Three to 10 years of income needs in diversified balance investments.
● And the rest in growth assets for the long term, and perhaps the very long term.
BEYOND TOMORROW: Some investors are looking for long-term investments – 100 years and beyond – with the needs of future generations of grandchildren in mind.