Many financial advisers, money managers and investment experts are now forewarning that stocks, bonds, money market funds and real estate are all headed in the same direction for the foreseeable future: single-digit returns, The Wall Street Journal reports.

Warren Buffet and Bill Gross have both said they expect the equity markets to return 5% to 8%, and their predictions have merit, according to The Journal. Stocks in the S&P 500 are trading at 26 times earnings, dividend yields are a nominal 1.6%, and interest rates have been cut to the bone. At the beginning of every bull market, P/E ratios have been below average, yields have been at least twice as high and interest rates have had room to cut.

With the Fed funds rate at 1%, its lowest rate in 45 years, bond valuations aren’t likely to increase, either. That means fixed-income investors should concentrate on yields rather that price, and many expect bond yields to average 5% in the near future.

Lowered interest rates helped fuel the real estate boom, too, which isn’t likely to last much longer now that real estate prices have soared throughout much of the country, according to The Journal. One researcher said he expects REITS to average 6% to 7% gains in the coming years. Finally, the average yield on money market funds is a mere 53 basis points.

But even with all four major investment classes hitting the skids, investors still can take action to improve their portfolio’s performance. First, it’s more important than ever for investors to diversify, rather than load up on any one sector. Second, investors may need to save more. Third, they should be mindful of costs. If returns really do remain in the single digits, then improving fund fees can do a lot to help performance.

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The staff of Money Management Executive ("MME") has prepared these capsule summaries based on reports published by the news sources to which they are attributed. Those news sources are not associated with MME, and have not prepared, sponsored, endorsed, or approved these summaries.

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