The pension gap is becoming the rule, not the exception. The proportion of people who will be working, or who will be able to work in the future will have fallen to 32 percent by 2025, down from today's 39 percent. This means that the value of conventional pensions will also drop. In this scenario, wouldn't it be a good idea to supplement your future income from employment with capital income? And people in work could do this by making equity investments - i.e. "shares" - to participate directly in productive capital.
The following explanation sheds some light on why using equity investments to build up your income and assets could be important. Let us assume that every employee in Germany, France, Italy, Spain and the UK had invested €50 a month in their local stock market from 1992 to 2014, using a savings plan . If this particular savings method had begun in 1992, the workforces of these five nations would today own a total of almost 45 percent of the market capitalization of the MSCI Europe. This equity index is worth around €2.5 trillion and covers 85 percent of the market capitalization of listed European companies. Seen from a national perspective, the results are even more striking: for example, German savers would now own almost 100 percent of the DAX. From a purely theoretical perspective, Italians and Spaniards could have reached even higher percentages. The French would own around 50 percent of their leading index; the Brits would own almost 30 percent of theirs.
The power of a savings plan
The following example demonstrates the importance of equity investments for your current capital income, as well: if you'd started with a savings plan in 1992, a total invested amount of €13,800 would have yielded returns of almost €23,000. If we assume a dividend yield of 3 percent on investments totaling, let's say, €40,000 (which, in a generous calculation, corresponds to the total result), you could be now raking in €1,200 annually in capital income - or €100 a month. This tidy little sum might not be enough to fully support you in retirement, but it's a rather good start. The 3 percent dividend yields used in these calculations are no guarantee of future performance: they are simply a yardstick which accurately reflects previous rates. Our studies show that dividends develop in a much more stable manner than corporate sector earnings do. So: draw up your savings plan today. There's €100 a month waiting for you when you retire. Everyone can have a certain standard of living - by making equity investments in shares.
The following explanation sheds some light on why using equity investments to build up your income and assets could be important. Let us assume that every employee in Germany, France, Italy, Spain and the UK had invested €50 a month in their local stock market from 1992 to 2014, using a savings plan . If this particular savings method had begun in 1992, the workforces of these five nations would today own a total of almost 45 percent of the market capitalization of the MSCI Europe. This equity index is worth around €2.5 trillion and covers 85 percent of the market capitalization of listed European companies. Seen from a national perspective, the results are even more striking: for example, German savers would now own almost 100 percent of the DAX. From a purely theoretical perspective, Italians and Spaniards could have reached even higher percentages. The French would own around 50 percent of their leading index; the Brits would own almost 30 percent of theirs.
