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Monday, September 19, 2011

Demographics, Investing, and the Stock Market

Picked up on this brilliant observation by a guy, which I had seen but never seen quite this way.

If America is graying (and it is) and a huge storm of baby boomers is heading into retirement (and they are) then one fact is inescapable..... more money is going to be coming OUT of the stock market than is going IN to the stock market over the next 30 or so years.

It does not take a math genius to see this. Since many many boomers have investment plans that focus on IRAs/Keoughs/401K plans, this means that huge eyepopping amounts of moneys will be leaving the market, as folks use it for what they planned to use it for.

Will the market overall continue to go up? Not unless the demographics change. Individual successful companies may go public or have public offerings which will succeed, or we may inflate the currency so that it seeks safety in investments. Both of these will account for some protection against what is going to be the overall trend, but the overall trend is inescapable. Current investors simply are not going to see the kinds of returns we have seen since 1970. It is a mathematical impossibility.

Younger guys in the market should take this into account. Simply buying a "value based fund" in Fidelity or Vanguard will be a losing proposition over the next 30 years.


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