Regardless of a person’s age and educational status, part of whom he or she will become is determined by events experienced during his or her early years. Looking back over today’s total population, various groups can be identified by events occurring in their formative years. In no way does this mean that every person of a similar age is exactly the same as others in that age group, but certain generalities can be made when defining their investment preferences. For example:
- The so-called “Greatest Generation (born before 1946),” a moniker assigned by Tom Brokaw to World War II-era Americans, was comprised of two population groups: people who fought in uniform, and people who contributed to the war effort as civilians. Everyone was in the struggle, all together as (likely) never before and never since (with the possible exception of 9/11). About 420,000 Americans died in the War. The fortunate ones who returned home prioritized families and a consumer-driven, hardworking, peacetime economic engine. These people had little access to equity markets, as pensions and annuities ruled the day for retirement planning.
- Baby Boomers (born between 1946 and 1964) were the aftermath of our newly-won peace. As a Boomer myself, I understand this generation most of all. Our formative events included the war in Vietnam, integration, and the resignation of Richard Nixon. Our parents emphasized education, and as a result, we were often the first college graduates in our extended families. As we reached our peak earning years, the Internet, discount brokerages, and Qualified Retirement Plans enabled investment accounts to thrive. While 9/11 startled the markets (and us), we overcame the shock, prosperity returned, and wealth grew rapidly.
- Generation X (born between 1965 and 1976) grew up in the shadow of an entirely new era of perpetual war (especially the Cold War), although it has been prosecuted primarily on other continents. Their parents joined the NASDAQ craze of the 1990s, only to experience the devastating “Dot-com” bust at the end of the Century. The “Crash,” coupled with 9/11 and the Great Recession, led Gen-Xers to be reluctant to trust in our markets. Following the market devastation of the era, prosperity returned, and Generation X now loves the equity markets for the action.
- Generation Y (born between 1977 and 1996; also called Millennials), were raised in an era of peace, prosperity, and innovation. As they matured, ubiquitous electronic devices dominated their time and energy. Their entire lives have revolved around communication power that continues to stun prior generations. Young investors need to get an early start to address the expected cost of living in second half 21st Century America.
- Generation Z (born after 1996), have no interest in how things “used to be done.” Every byte of data is available instantly, and the totality of information is overwhelming. Directing this group toward a planned and organized financial future is a challenge for any person aspiring to become a financial advisor. No one yet knows what future events will impact this group.
Investing priorities and styles very much depend on priorities that were developed early in life. The “Greatest Generation,” and even more so their parents and grandparents, are primarily stock-averse, as the Crash of ’29 and the Great Recession shaped their fears for life. More recent generations are accepting of investment strategies involving equities. All ages should remember that no one investment strategy will provide a general level of confidence, success and prosperity. Diversification over time provides the best chance to achieve true Financial Independence, regardless of demographics.
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