Larry Fink is renowned for his role as the CEO of BlackRock, one of the world’s largest investment management firms. Much like Warren Buffett, Fink has earned a reputation as a visionary in the world of finance, leveraging his expertise to advocate for long-term investment strategies and the power of capital markets to drive economic growth.

While Buffett is celebrated for his astute value investing approach and business acumen through his company Berkshire Hathaway, Fink’s focus on building a behemoth asset management firm, and fostering broader access to investment opportunities, I guess reflects a similar commitment to empowering individuals to secure their financial futures, right!?

Annual Letter

While it might be considered by some as a ‘poor cousin’ of the Berskshire Hathaway annual shareholder meeting, Fink publishes an annual letter that gets little coverage but does contain some interesting ideas and reflections on markets, investing and life.

In a heartfelt reflection on his parents’ financial journey, Larry Fink’s 2024 Letter to Investors shares insights into the power of investment in securing a comfortable retirement. Key take-aways for me for you:

Building Retirement Income

Despite their modest incomes, Fink’s tells the story of his parents amassing significant retirement savings over their careers.

He says that this is largely due to their commitment to investing in the US stock market. This decision, guided by the father’s belief in the potential for growth in stocks and bonds, proved immensely beneficial, multiplying their investments over the years. They died in their 80’s but he calculates that they had accumulated enough to comfortably sustain them till 100 years of age.

Fink says his personal experience of managing his parents’ finances after their passing underscored the importance of investment for long-term financial security. This realisation served as a poignant reminder of the founding principles behind BlackRock, the company he co-founded decades ago. Founded with the goal of making lots of money but also assisting individuals in achieving a secure retirement. BlackRock, Fink says, is aimed to empower people to participate in the capital markets, recognizing their potential to generate wealth and foster economic growth.

Through the lens of his parents’ story, Fink emphasises the transformative impact of prudent and diversified long term investment on financial freedom and dignity in retirement. I can’t agree more with him here. It takes time, but damn does it work!

He advocates for broader and easier access to the capital markets, believing that they will continue to play a pivotal role in shaping economic prosperity in the 21st century. Inspired by his parents’ legacy, he concludes with a hopeful vision of a future where more people can retire with the same sense of security and independence. Here here.

Worth a read.

US Capital Markets

US Capital Markets are really something, and Fink states that many other nations are now trying to replicate it – to encourage investment in a prudent and long-term manner – to encourage the distribution of wealth, and investment in publicly listed companies – to raise all boats.

When we think of the S&P500 (the biggest 500 listed companies in N.America), we hear some great long term growth numbers, but we have nothing to compare that to – well let me solve that for you.

The ISEQ Index is Ireland’s own Capital Market, which contains the largest 20 listed companies in Ireland, such as Kingspan, Kerry Group and Glanbia. As a major international market, you’d expect decent performance etc from it. Well it was founded in 1988 at a start price of c1,200. Today is stands at 9,931, back to it’s previous all-time high in 2008 before the Global Meltdown.

In the same period, the S&P500 went from 250 to 5,000.

• ISEQ multiplied in value c.8 fold
• S&P500 multiplied in value c.20 fold.

The size of the 2 markets is irrelevant, but the multiplier effect you, as an investor, got from each is hugely important! One can see why all Americans have a heavy bias to invest in the S&P and nothing but the S&P!

The chart below from www.tradingeconomics.com shows the trajectory of the ISEQ and the S&P500 over those years.

ISEQ 1988 to today:

S&P500 1988 to today:

An Interesting Nugget on the S&P500 vs non-S&P

I’m calling the rest of the world ‘non-S&P500’ now – it’s a bad sign!!

Anyway, interesting research here by Morningstar, where they compared performance of the S&P500 and the MSCI EAFE (which is made up of 21 European, Australasian and Pacific country markets – the rest of the world basically). They tracked the performance of the S&P and the EAFE from 1974 to 2023.

In summary, the S&P outperformed the rest of the world 59% of the time but in years where S&P delivered less than 6% return, the rest of the world did better than it, by c2% per year.

That’s not to say that the rest of the world protected you from declines in years when the S&P 500 was negative, such as in 2020 or 2022. But it did less poorly, is the findings.

The rest of the world was a good hedge against the S&P 500 over the period, is what the research suggests. I touched on this potential based on my own research in Blog 242, ‘Should I Go All-In On The S&P500’ but it was lovely to see it academically verified!! So this one’s for me moreso than you dear reader 🙂

Fink-About It

There was a sign in my Granny’s kitchen in Rathdowney, County Laois that said ‘God Give Me Patience, But I Want It Right Now!’. I always smile when I think of that sign hanging in a modest but proud kitchen, a kitchen that always greeted us with the sizzle of a few sausages in a pan!

If we are saving for our ‘next chapter’, whatever or whenever that may be’, that point will come along soon. As I drove my own parents to the airport at ridiculous-o’clock this morning, we were chatting about the fact that they are 20 years retired this year. I was reminding them, not that they need it, how fortunate they are to be fit and well and enjoying life together – even if it might not always feel like they are! I see many who haven’t been as fortunate in their retirement years.

They were remarking on how quickly those 2 decades have flown. Just like the previous 2 decades during which they raised myself and my 2 brothers. Time does fly. We’ll all hopefully be chatting with someone 10 or 20 or 30 years from now, and remarking on how quickly those decades have gone by.

Most of us don’t need to multiply our wealth over the next few weeks, we have time, and hopefully, if my Granny’s kitchen sign is anything to go by, we have the patience to enjoy the ride!! A diversified and patient approach, properly executed, will generate more than we will ever need.

And if you don’t want to take my word for that fact that a plan, well executed will see us right – Fink’s BlackRock conducted research on 1,100 retired folks. The survey showed that after c20 years of retirement, the average person still had 80% of their pre-retirement money still intact!

Paradoxically, research also suggested that only 32% reported feeling comfortable about spending what they saved. They had it but they didn’t know they had it perhaps? Maybe they just didn’t have anyone who could help them see it and believe it. If that’s you, get help – it could be worth it’s weight in a life fully lived.

Paddy.

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