REUTERS/Ruben Sprich
- Investors should be putting at least 80% of their portfolios into stocks and hard assets, Larry Fink said.
- The BlackRock CEO pointed to catalysts that could power stocks higher over the long-term.
- Investors with high tolerance for volatility could even have 90%-100% of their portfolios in equities, he added.
Long-term investors should be allocating most of their portfolios to stocks and other hard assets, according to BlackRock chief Larry Fink.
The CEO of the world's largest asset manager touted stocks and hard assets, like real estate and infrastructure as healthy long-term investments. Though financial advisors typically tell investors to allocate 60% of their holdings to stocks and 40% to bonds, there are a lot of factors that make stocks more appealing over the long-term than in past eras, Fink said in an interview with CNBC last week.
For one, investors have good opportunities to put their cash into artificial intelligence and robotics, as well as companies that are nearshoring, Fink said.
Investors are also likely living longer lives than they did in the past, thanks to new medical advances and drugs like Ozempic, which is seen as a potential cure for obesity, as well as breakthroughs in other areas such as Alzheimer's.
A longer lifespan means investors need to be able to support themselves for longer, and should therefore tolerate more risk by investing in stocks for a longer period, versus shifting more to bonds as they get older.
"For a long-term investor, with a long-term view, who can tolerate market volatility, you should be at least 80% in equities or hard assets," Fink said.
Investors who have an especially high tolerance of volatility could even have a 90% or 100% allocation to equities, Fink added, though he noted that many investors couldn't afford big downswings if their portfolio allocations were that high.
"You've got to have a 10, 20-year view," Fink added. "I'm a hopeful person. I believe that in 10 years, in 20 years, humanity will be in a better position than it is today. With that view, I want to own hard assets. I want to own equity. I want to be part of this economy."
Bonds, meanwhile, could face more trouble in long-term as interest rates stay higher-for-longer. In particular, the yield on the 10-year US Treasury could surge past 5%, BlackRock strategists said in a note this week, as bond investors will soon feel pressure from the market's rising term premium. That's the yield investors are compensated for by buying long-dated US Treasury bonds, which have more interest rate risk than short-term Treasuries.
Stocks edged higher on Tuesday, with the S&P 500 up nearly 15% from the start of the year. Meanwhile, the 10-year Treasury yield ticked slightly higher to trade around 4.8%, with the latest bout of selling pressure coming as investors mull the impact on Fed policy of strong September retail sales data release Tuesday.