In an interview with Barron’s, Raj Sharma, managing director of the Sharma Group at Merrill Lynch Private Wealth Management, says that having an advisor is more valuable and important in a bear market than in a bull market because an advisor will underscore the value of having a long-term plan.
When asked by Barron’s how his allocations are evolving in the era of inflation and higher interest rates, Sharma said that while inflation cuts into an investor’s purchasing power, it can also improve a company’s ability to increase prices and their profit margin. He advised a balanced approach that isn’t all about growth or value. Calling this “the golden age of active management,” Sharma added that passive management only works when a rising tide is lifting all the boats but not in this environment where there are winners and losers.
As for investment opportunities outside of U.S. equities, Sharma reiterates the importance of managing exposure to the different economic systems in each emerging market. While international equities have underperformed the U.S. for the last 10 years or so, he doesn’t expect that to continue for the next 10 years.
Lastly, Barron’s asked Sharma how retirement planning has changed over the last 30 years, and he responded that the reliance on the 60/40 portfolio is shifting. Investors will need a new way of allocating capital for the next decade or so: fixed income as “safe money” but also three buckets. The first bucket would be income from equities, private credit, or real estate. The second bucket would be returns from investing in global equity markets. And the last bucket would be alternative investments, including private equity.