Jul

26

Boomers and Future Investment Directions

Posted by cameron

July 26, 2007 |

The guessing game began some time ago; what will the boomers do with their investments? We have been saving for decades, at least some of us have. Saving into the stock market through various means including 401Ks. According to the tax rules Catch-up savings means that a higher percentage of income can be saved at a later age, so savings are accelerating. In thinking about mega-trends for future long-term investments you cannot ignore the boomer generation, there are just too many of us. The mega-trend of the future is still something to guess about but boomers will still be a part of it. Money and values will certainly shift over the coming two decades and it is worth giving pause if you care about long-term investing.

To model the future I decided to model my own changing values. Not everyone is the same but my past is not much different to most of the boomers so why should my future be that much different. That’s my starting hypothesis anyway.

At 35 I was in the most aggressive stock growth investments available. Asset Allocation meant a home to live in and stocks. Some boomers will only do one of those and some will do none but its funny what happens at 60. Holy Cow I’m going to need to do something soon. The impact of a drop in the Dow is amplified by 10 times. A drop of 200 feels like a drop of 2000. Risk is suddenly real and lifestyle threatening. At 60 you suddenly turn a corner into the real world and all changes forever. Well boomers are turning that corner in droves. The oldest are now turning 61 and the youngest around 44. They will all turn that corner over the next twenty years.

So what is changing in the future versus the past? There are five major differences between my past and my future:

  1. Mortgage debt is ended.
  2. Asset allocation is more conservative.
  3. There will be more time to play.
  4. Social and environmental values are increasing.
  5. There will be healthcare issues and death. Sorry, but its in the future.

Numbers 3 & 4 on this list stem from a shift from all out career chasing to all out “play” chasing. That makes you more aware of the environment we live in. It also makes one want to give back. In this scenario the investment winners will be anything “green”, anything to do with volunteering and grown ups toys. Money will be spent.

The conservative shift in asset allocation (number 2 above) doesn’t make all “aggressive growth” investing disappear, but rather take a smaller percentage of the pie. So stock investment choices will shift from Growth to Blend and Value. Other money will move out of the stock market altogether. In thinking about it I am reminded that Large-Cap Growth Mutual Funds have been beaten by Large-Cap Value Funds for several years now. Maybe the trend has started.

Of course the other huge trend will be in healthcare and death but I don’t want to think about that, let alone invest in it. There is a lot more fun to be had between here and there.

But if you want to invest in the one thing that all boomers will do then that would be it, especially if you are younger than the youngest boomer. Ride the wave.


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