More of America’s millionaires have a sober outlook on the U.S. economy headed into 2016, with many assuming another year with a flat S&P 500 index leading to a lower personal rate of return and a majority belief among millionaires that household income will remain the same, according to a CNBC report.
Meanwhile, the Fall 2015 CNBC Millionaire Survey says, the rich are concentrating investments in only a few stock sectors, and more so outside the stock market entirely.
“Returns will come down,” said Ron Carson, founder and CEO of Carson Wealth Management, who works with many mass affluent clients. Carson said this outlook is the right one for investors. “If you’re netting 4 percent to 6 percent and doing it with a level of risk that’s comfortable, that’s pretty good,” the financial advisor said. “And for the next decade, at least, investors need to think about rates of return in the 4 percent to 6 percent range, unless you are willing to take on liquidity or market risk that is high,” Carson said.
Carson said most investors should join millionaires in thinking of this outlook as being permanent: “Miilionaires are very understanding of the fact that the days of double-digit returns without having to work are gone,” he said.
Carson also gave a thumbs up to real estate investment for those willing to give up daily liquidity.
Among stocks, three sectors dominate millionaire portfolios: technology, financials and health care. Health care was the surprise among the sectors where millionaires plan to invest more next year. Technology and financials have typically flip-flopped quarter-to-quarter for the top two spots among millionaire stock plays, but health care is ahead of financials for 2016, according to the CNBC Millionaire Survey.
The percentage of millionaires who indicated that the greatest percentage of assets would go to health care jumped from 13 percent to 16 percent. That put health care ahead of financials, where interest dropped steeply, from 23 percent of millionaires saying it would be among their greatest investments down to 12 percent in the fall survey.
Carson noted that his firm’s global portfolio has been a bright spot this year with the U.S. market being flat, but he sees millionaires seizing upon real estate ownership as one of the most interesting opportunities for investors. Carson’s firm bought and rehabbed individual homes, and that investment is up 19 percent year-to-date, with an 11 percent dividend yield. However, it’s an illiquid investment that requires a five- to six-year holding period. “If you can give up daily liquidity, you’ll get a better return,” Carson said.
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