Easy ETF Index Funds Set And Forget Investing Strategy For Next 10 to 20 Years!

Duration: 11:41 1590 transcript words EN summary

Video summary

The video addresses a common investor desire for a simple, "set and forget" strategy that guarantees significant wealth growth over the next decade or two, similar to the massive returns seen in the S&P 500 during the last few decades. The speaker argues that relying on historical performance is dangerous because the market environment has fundamentally changed; while the index delivered tenfold returns from 2009 to 2024 largely due to rising valuations and falling interest rates, current conditions suggest a different future. With P/E ratios at historic highs and interest rates potentially stabilizing or rising again, expecting similar exponential growth without significant risk is unrealistic. The speaker warns that if the artificial intelligence narrative fails to deliver on its promises, stock market returns could turn negative over the next ten years, making the era of easy wealth accumulation a thing of the past. To navigate this uncertain landscape, the transcript suggests looking beyond standard equity indices and considering alternatives like Berkshire Hathaway, though with caveats. While Berkshire holds a massive cash reserve and has less exposure to AI than the broader market, it is not a guaranteed safe haven and carries its own risks, particularly in the insurance sector which has been quiet for years but could face future crises. The speaker emphasizes that true safety comes from solving one's life problems first—having a secure foundation so that market volatility does not force panic selling or poor decisions. This approach prioritizes building long-term value and safety over chasing high returns, acknowledging that riding the wave of easy money without understanding the underlying mechanics can lead to financial ruin when the cycle turns against investors. Ultimately, the video concludes that there is no magic bullet for getting rich easily in the current economic climate, and investors should adjust their expectations accordingly. Instead of counting on a tenfold return, the focus should shift to finding undervalued assets, such as specific companies like Archer Daniels Midland when they are cheap, or engaging in practical businesses like gardening or AI ventures that generate real value. The speaker advises against gambling retirement savings on broad market indices without a plan, noting that while some may choose to ride out the current bull market hoping for survival rather than profit, doing so requires accepting that easy wealth is no longer guaranteed. The core message is to remain cautious, focus on intrinsic value rather than price gains, and prepare for a future where investment returns are more modest and require more active thought than in the recent past.

Read the full video transcript

Good day, fellow investors. So, I recently made a deep dive into international versus US investing, and this was a great comment. Yes, Sven. Thank you for your analysis, but give us simple solutions for those people that don't have time, that want to get rich over the next 10-15 years, 5x, 10x like the S&P 500. Is there something safe fund, something like that, Berkshire, that can do that for me? In this video, we'll give the key answer to that. Because when you look at things, the S&P 500 is a 10x, 12x from 2009. So, 17 years, 12 times your money. If you're starting saving for retirement now, people are banking on that. They're thinking, "Oh, I should invest that much. Markets will go up. In 10 years, I'll have five times, 10 times my money. Everybody happy." Is the 10x world in the next 10-15 years still here, or has the world changed? That would be the first correct question to ask. Now, if the AI narrative holds, and it really works as Mark Zuckerberg or Elon Musk are planning, then yes. As the S&P 500 index is all AI, if AI delivers on the promises, you will have your 5, 10x in the next 10 years. If the AI promises are not delivered, you will not have an x positive over the next 10 years. That's the truth. Because if we look at the current valuations for real profits and returns, for the US, this is GMO's asset forecast, you can expect seven, eight negative yearly real returns. That's minus 50% over the next 7 to 10 years. Why? Well, because if you look at valuations, yes, the stock market did great over the last 43 years. Yes, next week my birthday. I was born in September 1983, 43 years. For the last 43 years, the market went just up because the P ratio was nine when I was born and now it's 41. That's a 4X just on valuation. Divide the current S&P 500 by four just on valuation. Where would it be with a P ratio of nine? It would be at 2,000 points. 2K S&P 500, not 7K. So, that is what you have enjoyed over the last almost 15-20 years. And at 2K now, it would be with terrible returns compared to 2007 or even the 1990s. Nobody would love stocks at this moment. Further, if we speak of yields, the current yield is 1%. Average historical yield was 4%, but the key factor for the investing mania, easy getting rich for the last 40 years, has been interest rates going down. If we look at the federal funds effective rate, people forget that it was close to 20%, 20% then has been going down. And only that this was transitory and then they were expecting lower rates. Now, perhaps we will not see lower rates. But interest rates move in big cycles. What if this is the start of the next cycle? Over the next 20 years, that could be very, very bad for stocks if we are in a new interest rate cycle. Everyone is focused on the short term. So, rates up or down, down, up, this short term, but the cycle is what's important. Further, look at the US Treasury. 10-year Treasury was at 15%. Now it is at 4%. So, we are still on relatively low interest rates. Then you can say emerging markets seem cheaper. Well, emerging markets are also all into the AI narrative. Information technology is 41% of the iShares Emerging Markets ETF with Taiwan Semiconductor, Samsung, SK Hynix making more than 25% of the index. Then, if we look at what worked also over the last 60 years, the population went 1950s 2 and 1/2 billion, 5 billion, 8 billion, huge jump there. And now the population growth will slow. That changes a lot of things. It's now from 2.3 in the '60s, 2% '70s, '80s, '90s, and now we are in the single digits growth that will also affect the world. China is developed, slowing down. India, we'll see whether it will be the new China, perhaps not. The situation doesn't look great, and it seems that AI is the only hope. So, the message on Wall Street everywhere is just invest your money, forget about it. If it goes down, buy more, over the long term you will do great. We'll all make you rich. Jamie Dimon pushes SpaceX to others. Wall Street just keeps selling what is bought. But the truth is, I hope it will be the same as it was the last 17 years or half. Let's be honest. If you do 5x the next 15 years is good. You don't need to do 10x. What if it is half or a quarter of negative of what it was the last 15 or 45 years? We all seek for cheap funds, easy, and then Berkshire is still at 366 billion in cash. Which is 40 something percent of the balance sheet. Now Greg Abel is spending something I don't know whether me and Warren agree, but that's a different story. I really hope it remains the same for all, but if not, stocks give you zero returns at best over the next decade, 20 years. Bonds on inflation, money printing go down 90%, you lose everything, especially if interest rates keep on going higher. Less people, real estate with higher rates stay ugly. Gold, I'm sure it will get to 10k, 20k, but you never know with gold. There can be a decade where it goes down, especially it already made its move. Now we can say it's fairly risky. I'm saying that at this moment in time, after 15 great years and actually after 45 amazing years, we are at the peak of investment gambling. And then you come to me and you ask, "Give me something easy so that I can just make money like my dad made money the last 15 years or 20, 30. I can't be hedged. I can't spend too much time working on it. Just give me easy." Just a perspective, our parents, this is when my parents bought a house, didn't have it easy. They took a mortgage with 13, 15, 20% rates. This was having it easy. And when you have it hard, returns are great. When you have it easy, returns are ugly. The message here is first you have to solve your life. If your life is solved, then even if crazy things happen, hyperinflation, government disruptions, having your life solved will prevent you from doing stupid things. If you're gambling your retirement on I don't know the S&P 500 easy going further, that's crazy. Focus on value no matter what. Don't focus on the gains. Don't focus on how to make 15x next 10 years. Focus on making value now and slowly building that long-term safety. Start an AI business, that's where the money is. Gardening business, something extra that you might want to consider or that you like. Because when it comes to investing, maybe cautious yes to Berkshire. It's not great. It's not good. Berkshire is okay. But that's then again, owning stocks. Is it safer than the S&P 500? Yes, it has much more cash, has little AI exposure, but it's also priced for that already now. Better? Yes. You might think about it. So, the only option might be Berkshire. But Berkshire is insurance. You have not yet seen a crisis in insurance in the last 10-15 years. Early 2000s, 1980s, Berkshire was trading at P ratios of 8-9. It will happen again. And then you have to double down. If you have your life solved, then it's easy and you don't sell like most people do. So, the key question is, Sven, what if we are at the start of a very negative period? What then? Because if you look at this chart from 1929 to the 1950s, at some point the stock market real returns was a negative 70%. 1968 to 1982, real returns after 15 years negative 63%. 2000 to 2009, real returns negative 60%. And look, roaring 20s, booming 60s, booming 1990s dot com will change the world, booming money printing AI will change the world. And you ask me how to get rich easy. The funny thing is that when I prepared this video in 2025, I said in the same video, buy Archer Daniels Midland because it's cheap relative to what it offers, safety, food, inflation protection. Now ADM has almost doubled. It's not cheap anymore. Time gives you the opportunity to find those cheap things, but that's again value investing applied. You need to know what you're doing. Riding the wave, okay, we are still riding it. If you still want to ride it without thinking, you can do that. But it might end up not making you money. You just hope to survive. I'm thinking here, what can I say? Maybe Berkshire, but solve your life and then just the extra. Don't count on 10 X's to get rich. I hope I have asked the right questions for you. Let you think. Let me know in the comments what you're thinking to see if there are some solutions, perhaps better than Berkshire. But Charlie Munger said it all, why should getting rich be easy? It was very easy the last 15 years. It might be so the next 15. It might not be.