Baby boomers still hooked on stockmarket
LOS ANGELES: When it comes to investing, the elderly can’t quit their stock-market habit. Nearly two-thirds of US adults aged 65 and older own equity through individual stocks, mutual funds or retirement savings accounts, according to an April survey by Gallup. That is up from roughly half of Americans in the same age cohort before the 2008 financial crisis.
Boomers are the only age group to see stock ownership rates rise over that period.
Conventional financial wisdom suggests investors should rotate from risk assets such as stocks into havens such as bonds as they get older. But many abandoned the old “100 minus age” equity-allocation rule when, for much of the past decade, the stock-market appeared to be the only place to get returns as interest rates hovered near zero. Since US stocks bottomed in March 2009, the S&P 500 has logged a total return of more than 700 per cent, com- pared with the Bloomberg US Aggregate Bond index’s total return of about 46 per cent over the same period, according to Dow Jones Market Data.
Even as rates have risen rap- idly since last year, making bonds and cash look more attractive than they have in a long time, many older Americans say they aren’t ready to part ways with their stock-market bets.
“FOMO does apply to me as well,” said 76-year-old Shan Bhattacharya, referring to a fear of missing out on gains.
Mr Bhattacharya, a retired utility executive, said the majority of his investments were held in equities, and a portion of his portfolio was dedicated to growth-focused tech shares such as Adobe, Apple and Nvidia. He has a pension and receives Social Security but uses income from his investments to supplement his spending and keep pace with inflation.
More members of the baby- boomer generation had moved into retirement age and brought their stock holdings with them, said Jeffrey Jones, a Gallup senior editor. Baby boomers hold 56 per cent of the country’s household corporate equities and mutual- fund wealth, according to Federal Reserve data as of the end of 2022.
Baby boomers, born in a post-World War II era of prosperity, have higher stock ownership rates than the preceding silent generation, which overlapped with the Great Depression, according to Gallup.
Many baby boomers began investing during a period of stock-market success in the 1980s. They have witnessed market crashes – from Black Monday in 1987, to the bursting of the dotcom bubble, to the 2008 financial crisis, to the onset of the Covid pandemic – and have seen stocks recover and climb higher time and time again.
Individuals who have experienced high stock-market returns over the course of their life report higher financial-risk tolerance and are more likely to invest in the stock-market and allocate a greater share of their portfolio to equities, according to research by finance professors Ulrike Malmendier and Stefan Nagel.
“Baby boomers came of age at the start of a secular bull market,” said Gina Bolvin, president of Bolvin Wealth Management Group. “In their experience with crashes, when the market bounced back, it reinforced the idea that stocks are safe investments.
Their entrance into the stock-market coincided with the rise of index funds, providing diversified, passive options to invest. The first index mutual fund, the Vanguard 500, launched in 1976 and the first exchange-traded fund, the SPDR S&P 500 ETF, made its debut in 1993.
“Playing in the stock-market is not risk-free, but there are risks everywhere,” said Minh Tu, 65, who lives in the Atlanta suburbs. “Inflation can eat your assets.”