Baby Boomers - General Views on Investing
The baby boomer generation is a risky generation that is fearless when it comes to investments. They are focused mainly on stock investments and bypass the safer bond investments. Compared with other generations, they are less interested in digital investments like cryptocurrency. However, there is a small faction that is investing in this market. The best advice from baby boomers about investments is to stay invested in the long-term.
Baby Boomers are Investing in Risky Stocks
- Baby boomers are now more prepared to retire than a few years ago. However, they are also risking their savings due to investing so heavily in the stock market. In the words of Meghan Murphy, "If there was a market downturn, they could lose a significant chunk of what they’ve worked so hard to save."
- According to the calculations of Fidelity, "50% of American baby boomers have their 401(k) holdings invested in riskier allocations than Fidelity recommends for their age group." It is important to mention that 8% of baby boomers have their entire holdings invested in stocks.
- 63% of the baby boomers' accounts and their holdings from the Roth IRA savings plan retirement is invested in equities, according to the Employee Benefit Research Institute.
Boomers and Bonds
- Investment in bonds is a safer way to increase one's saving funds. The risk is lower than investments in stocks. However, according to Jared Dillian from Marketwatch, 80%-90% of baby boomers have their savings invested in stocks instead of bonds.
- In the past few years, baby boomers mentioned this rule of thumb: The percentage of their savings allocated in bonds must be equivalent to their number of years. So if someone was 65 years old, that person should have a 65% investment allocation in bonds.
- Bonds go down slower than stocks. For example, "stocks may have gone down almost 60% from 2007-2009, but a 35/65 portfolio of stocks and bonds only went down 24%". Despite this fact, baby boomers don't care about risking their life savings investing in stocks.
Baby Boomers' Investments Compared with Other Ages
- According to data analyzed by Legg Mason and Raconteur, 49% of baby boomers are less confident about their investment opportunities in the next 12 months compared to millennials. 49% of them have confidence, while 66% of millennials have confidence.
- According to data from LendEDU, American baby boomers were asked how they would allocate money if they were given $10,000. They were more interested in paying down debts than in investments into cryptocurrencies compared with millennials, who are currently 23% of investors in cryptocurrency.
Baby Boomers and Markets Investment Perceptions
- According to a survey of 998 people by Clovr, the baby boomer generation is least interested in cryptocurrency investments. It was revealed that only 18.3% of the surveyed baby boomers invested in cryptocurrencies.
- The markets that baby boomers would never invest in are junk bonds as rated by 58.3% of those surveyed, lottery by 47.2%, penny stocks by 52%, venture capital/startups by 38.9%, and cryptocurrencies by 37.6%.
- The market investments perceived as most risky by baby boomers are the venture capital/startup market as rated by 95.9% of those surveyed, cryptocurrencies by 93%, and stocks by 90%. Each percentage figure is the total percentage of respondents who responded as "somewhat to extremely risky" when they were asked about each market.
Rules of Investment Essential to Baby Boomers
- The first essential rule is to "Stay invested for the long term." 92% of the 400 American baby boomers surveyed by APCO Insight answered that by investing more time in the market, they could save more money for retirement.
- The second and third rules of baby boomer investment are to "Keep an eye on fees" and "Diversify your portfolio." 94% of baby boomers surveyed agreed on the importance of knowing what fees they are paying. 85% said that putting their money in different investments is the best way to achieve success.
- The two last rules from baby boomers are to "Protect yourself against market downturns" and "start saving early and often." 79% said that they think it is important to invest a portion of their regular monthly income. 60% said that they wished they had started investing as young as possible.
For this request, we researched reliable sources like CNBC and Marketwatch. In those sites, it was possible to find information regarding the preferences of baby boomers investing into stocks instead of bonds. On the Raconteur and Clovr websites, we found reliable data on the investment market preferences of baby boomers. Lastly, on the Business Insider website, we found crucial information about some rules that baby boomers follow when they invest in different markets.