After Two Of The Greatest Bull Markets In U.S. History, Why Are Boomers So Broke?
Last week, Jeff Desjardins of Visual Capitalist wrote in a post:
“While it’s true that putting your money on the line is never easy the historical record of the stock market is virtually irrefutable: U.S. markets have consistently performed over long holding periods, even going back to the 19th century.”
This goes back to Wall Street’s suggestion of “buy and holding” investments because over 10- and 20-year holding periods, investors always win.
There are two major problems with this myth.
First, on an inflation-adjusted, total return basis, long-term holding periods regularly produce near zero or negative return periods.
Secondly, given that most individuals don’t start seriously saving for retirement until later on in life (as our earlier years are consumed with getting married, buying a house, raising kids, etc.,) a 10- or 20-year period of near zero or negative returns can devastate retirement planning goals.
It should be obvious, when looking at the two charts above, that WHEN you start in investment journey, relative to current valuation levels, is the most critical determinant of your outcome.
(We have written a complete series on the Myths Of Investing For Long-Run. Chapters 1, 2 & 3 cover the concepts above in much more detail)
Baby Boom Generation Should Be Rich
Let’s look at this differently for a moment.
The financial media and blogosphere is littered with advice on how easy it is to invest. As noted above, over long-periods of time there is absolutely nothing to worry about, right?
Okay, let’s assume that is true.
The “Baby Boom” generation are those individuals born between the years of 1946 and 1964. This means that this group of individuals entered the work force between 1966 and 1984. If we assume a bit of time from obtaining employment and starting the saving and investing process, most should have entered the markets starting roughly in 1980.