Advising Clients

The World’s Worst Investment Advice

30 Mar 2023

2 min read

Avoid investing in unregulated cryptocurrencies, follow proven strategies based on long-term results, and save for retirement. Your future depends on it!

Investing can be a confusing landscape filled with both good and bad advice. Let’s count down with the three worst investment ideas to help you navigate the pitfalls.

1. Investing in Crypto

Cryptocurrency has gained significant attention, but it comes with substantial risks. One of the most concerning aspects is the lack of regulation, leaving investors unprotected. Additionally, celebrity endorsements can often mislead investors. The volatile nature of crypto, combined with the risk of losing access to your funds if you forget your password, makes it a high-risk proposition.

2. Declaring the 60/40 Portfolio Dead

The 60/40 portfolio, comprising 60% stocks and 40% bonds, has been a staple investment strategy for decades. Developed by Nobel laureate Harry Markowitz in 1952, this approach has seen its ups and downs. In 2022, the 60/40 portfolio experienced a significant decline, leading many to pronounce its demise. However, it’s important to remember that one year does not make a trend. Over the past 30 years, the 60/40 portfolio has delivered an annualized return of 8.23%. Don’t be too quick to discard a time-tested strategy based on short-term performance.

3. Advising Young People Not to Save for Retirement

A recent paper published in The Journal of Portfolio Management Research suggested that young people should not save for retirement. Instead, the research proposed a lifetime saving consumption model, essentially recommending that younger individuals focus on meeting their current spending needs before saving for retirement.

This advice is problematic for several reasons:

Immediate Financial Demands: When starting a career, there are numerous demands on one’s income, including taxes, housing, food, transportation, and student loans. The idea of saving for retirement can seem daunting, but it’s crucial.

Behavioral Habits: Regular savings, whether monthly or bimonthly, is a behavior that needs to be cultivated early. If young people get into the habit of spending their entire paycheck, they may find it challenging to save for retirement later.
Long-Term Financial Stability: Many people in their 60s and older lack sufficient savings for retirement, leaving them financially vulnerable.

Instead, let me give some time-tested investment advice:

Start Early: Begin saving for retirement as early as possible, even if it’s a small amount each month.
Prioritize Savings: Learn to prioritize savings over unnecessary expenses.
Avoid Expensive Purchases: Resist the temptation to spend on expensive items like new cars or luxury vacations until you have a solid savings plan in place.

Investing wisely requires careful consideration and avoiding common pitfalls. Steer clear of high-risk investments like crypto, maintain a balanced portfolio strategy, and start saving for retirement as early as possible. By following these guidelines, you can build a solid financial foundation for the future.

Important Information

The views expressed are subject to change and do not necessarily reflect the views of Thornburg Investment Management, Inc. This document is for informational purposes only and does not constitute a recommendation or investment advice and is not intended to predict the performance of any investment or market. It should not be construed as advice as to the investing in or the buying or selling of securities, or as an activity in furtherance of a trade in securities.

This is not a solicitation or offer for any product or service or an offer or solicitation for the purchase or sale of any financial instrument, product or service sponsored by Thornburg or its affiliates. Nor is it a complete analysis of every material fact concerning any market, industry, or investment. Data has been obtained from sources considered reliable, but Thornburg makes no representations as to the completeness or accuracy of such information and has no obligation to provide updates or changes. Thornburg does not accept any responsibility and cannot be held liable for any person's use of or reliance on the information and opinions contained herein. The views expressed herein may change at any time after the date of this publication. There is no guarantee that any projection, forecast or opinion in this material will be realized.

Investments carry risks, including possible loss of principal.

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