A Decade of Negative Returns
Last week, the S&P 500 Index made news by hitting a 4 year high. While Wall Street shamelessly hyped this grand achievement, here is the reality: At a time when tens of millions of Americans are nearing retirement, their portfolios have seen no real gains in the last four years. $10,000 invested in an S&P Index fund in 2008 is still worth $10,000. When you factor in the effect of inflation, investors have actually lost money over a four year period.
Taking a longer view of Wall Street’s performance, the data only looks worse. The S&P 500 in 2012 is trading at the same levels as it did in 1999. In effect, a 13 year investment has provided zero return(and in reality, negative returns once management fees and inflation are factored in) for the hundreds of millions of Americans who use Wall Street to steward their retirement funds.
For years, investors have been told that mutual funds are the safest and surest way to save for retirement. Yet, 5 out of 6 mutual funds have performed worse than the market itself, meaning most investors would be happy to have a portfolio that showed flat growth over the last 13 years.
Voting With Their Wallet
Not surprisingly, investors are taking notice of the abysmal performance on Wall Street and have begun to take action. In late 2011, Americans began to divert their money away from the stock market and directly into their savings and checking accounts.
Main Street is firing Wall Street.
From September 2011 through November 2011, the $139 billion inflow into checking and savings accounts was almost 13 times higher than the $11 billion inflow into stock and bond mutual funds and ETFs.
While the exodus of cash from the stock market is completely understandable, there is one problem with this strategy – the interest rates for savings accounts are meager at best, and are not keeping pace with inflation. This leaves investors in a quandary – invest in a guaranteed investment vehicle with poor returns, or sink their hard earned cash into a market that has done little in the past 13 years except put investors on a historic roller coaster ride.
Multifamily Investing Provides an Better Alternative
Fortunately, there are alternative investment vehicles that can provide excellent returns – and Multifamily investments are among them. By investing in a Multifamily apartment building, you are investing in a hard asset – one whose value will not dissolve overnight due to an ethics violation or a trading floor rumor. A multifamily investment provides significant tax advantages as well.
Demographic and societal trends are currently shaping the renter landscape for the next two decades. The time is now to fire Wall Street and explore alternative investment vehicles.