Baby Boomers: The Best Advice I Heard When I Was Young Still Applies Today

Investing is risky business, and we’ve seen some interesting cycles play out over the course of the past two decades. For Millennial investors out there, the great financial crisis and the pandemic may be the only two significant market declines younger investors have lived through (though some may be old enough to remember the carnage following the dot-com implosion). 

For baby boomers, the elongated historical time frame with which many such investors are working with allow for even more turbulence and periods of time in which significant losses occurred. The 1970s were not a great time to be an investor, with multiple crashes in the 1980s tied to surging inflation very reminiscent of what we’re seeing play out.

To a certain extent, I think there are demographic reasons for inflation (mostly younger folks forming families and being forced to spend more money than they may otherwise like, allowing for greater pricing power from large corporations). But with even more power concentrated among the largest companies today than before, inflation and other concerns seen a generation ago appear to be playing out in a similar way today. 

Indeed, while the 1970s (and a large part of the 1980s) provided mediocre returns for investors (and some notable crashes including Black Monday), there’s one piece of advice I’ve heard repeatedly since a young age I think still applies today. 

Time In the Market…

Person looking at a large alarm clock

I think the most relatable saying many investors can understand and be on board with is “time in the market beats timing the market.” Of course, the rise of exchange traded funds (ETFs) and other products which allow investors to be the market instead of trying to beat the market have allowed for greater portfolio diversification and impressive returns in recent decades.

Such vehicles are available to baby boomers looking to maintain some amount of exposure to equity markets right now. Indeed, I think these vehicles serve as an excellent option for that portion of one’s portfolio, which I’d argue for Baby Boomers should probably be a smaller allocation than Millennials or Gen X investors due to investing time horizon and risk concerns. 

But in terms of what may be ahead, whether we see a 1970s or 1980s type situation unfold, the reality is that staying invested and not missing out on a few of the biggest days in the market (which often closely follow crashes) allow investors to stand fast and ensure they’ll have the maximum amount saved in their retirement accounts over the long-term. 

This Advice Can Be Applicable to Other Asset Classes

Keys being passed from a real estate agent to a purchaser

Many investors may be concerned around where valuations are in the equity markets right now. I’m among those concerned about the multiples many stocks are trading at, which suggest we may be in for very lackluster returns over the next decade or so.

However, bubbles do appear to be forming in other asset classes as well, with real estate, crypto and other alternative asset classes from private equity to renewables and funds tracking this space now trading at valuations that appear to be approaching the maximum level investors can stomach with their current payments.

Unless interest rates come down meaningfully, and/or the economy grows at a much faster pace than many have expected, these asset classes may not be the places to hide they once were. That said, I do think that over the long-term, real estate and the aforementioned asset groupings should perform well. I think diversifying one’s exposure to such assets as one gets closer to retirement may make sense, and bonds and other fixed income assets may become more valuable as a tool for preserving one’s wealth. 

But missing out on the growth upside these assets provide over the long-term can lead to some emotional pain. I’ve always viewed missing out on upside as more painful (psychologically speaking) than losing money on an investment. So long as one expects to live another couple decades, these are asset classes I still think are worth holding here.

Investing Is Simple, But Not Easy, At the Same Time

Man thinking, with a stock chart heading up and to the right in the background

I think the whole mantra around “time in the market beats timing the market” relies on a core principle many of us in this Instagram-heavy economy may not have worked on: patience. 

In order for investors to see the kinds of returns investing gurus like Warren Buffett have seen over the years, it requires a level of patience I can only aspire to. Additionally, the fortitude to be able to step into really upside down markets and invest in companies when they’re near the bottom is incredibly scary and involves plenty of risk. But as the saying goes, the reward ultimately goes to those who are willing to take the necessary risks.

I think Charlie Munger’s advice (which follows a similar vein) that “money is not made in the buying or selling, but in the waiting” also applies here. Being patient and simply holding on when the going gets tough is what generates the vast majority of returns for investors over the very long-term.

So, whether you have a positive or negative view of where the markets are headed over the next year, five years, or the next decade – this advice is what I’m going to continue to try to implement in my own portfolio. I think for Baby Boomers thinking about what to do, or how to allocate their nest egg, this could be the most prescient advice to continue to ponder right now.