100 Years of Enormous Change
The world has seen enormous changes in the last 100 years since 1916, at that point in time, the worst of the Great Depression was still twenty years away.
Successful investors know successful investing occurs over decades and across generations. Short term fluctuations settle out. Long term trends dominate. And you see growth. Every decade so far has seen growth, no matter the ups and downs inside that decade. Population and technology are expanding and so is Australia’s GPD. The long term forecast if history is anything to go by suggests strong growth across the generations.
This is an idea that goes down well with most parents. They love their kids and they like the idea they can set them up financially, or at least offer some financial assistance, down the track.
History is a Good Guide
The Russell ASX 2016 Long Term Investment Report tells us Australian property averaged 10.5% and Australian shares averaged 8.7% since 1995. The 100 year averages are not far behind.
I speak with clients and potential clients who are aged 60. It is not uncommon to see them sitting on net assets of between $2,000,000 and $5,000,000 and sometimes $10,000,000. You wouldn’t know it by looking at them. After all, it is just money anyway. They are more concerned about doing a good job at work, planning their next holiday, seeing their kids/grandkids and adding a bit to their community.
At the time it seemed hard to achieve this financial position, however, looking back, it was not.
They own a home in a good suburb of a capital city. Pay maximum super every year and invest for high growth in Australian shares, negatively gear initially (positively geared in the long run) a residential property in a capital city / large regional area or even a small portfolio of properties, and possibly inherit a bit from their own parents.
Extrapolate $2,000,000 or $5,000,000 of net assets out for another 15 growth years… the net assets grow to somewhere between $5,000,000 and $12,500,000 by ultimate retirement at age 75.
That is significant wealth!!
100 Years from now
Consider this scenario….. You are a 60 year old who has an adult child aged 25 as of today. Your 25 year old adult child has their own child ten years from now at age 35, in the year 2026, it is quite probable that your grandchild be alive 100 years from now.
Think about it: in this scenario, your grandchild will still be alive in 2116. 100 years from now.
Grow Your Own Massive Oak Tree
100 Years is how long you should be investing for. That’s the time frame for your next property acquisition, and your next share purchase. 100 years until 2116. The expected lifespan of your yet to be born grandchild. Investing with a 100 year time horizon will see your unborn grandchild and their children take shade under the massive oak tree you planted for them as a seedling decades prior.
Bad Stuff will Happen
Over 100 years everything bad that can happen will happen. There will be wars, deaths, divorces, depressions, climate changes, and things we can’t even fathom as yet.
Just Think Clearly
Think clearly, and for the very long term. Filter out the noise. What should you invest in now for the lifespan of your grandchildren? The answer is well located properties, particularly in Melbourne and Sydney, on their own bit of dirt (ie not most apartments). And quality Australian shares paying regular and stable franked dividends in Australian companies that have been around for decades and that will likely be in business as far as the eye can see.
If you follow that simple recipe in the paragraph above, your grandchildren and great grandchildren will be doing just fine no matter what happens.
The information provided in this article is intended for general use only. The article is intended to provide educational information only. Please be aware that investing involves the risk of capital loss. The information presented does not take into account the investment objectives, financial situation and advisory needs of any particular person, nor does the information provided constitute investment advice. Under no circumstances should investments be based solely on the information herein.