How Baby Boomers Impact Investments
The Baby Boomer generation is the result of population growth occurring during the period starting in 1946 and running to 1960. It was during this period of time the United States was faced with one of the most dynamic demographic shifts ever occasioned in its history. The population growth was nearly double the average for the 1900s. The age of the Baby Boomer is influential, then, on the overall average of the United States’ population in general and accompanying economics. The country nowadays is growing older and the new demographic is summarily affecting costs relative to health care, rate of savings, funding of social security; and productivity.
Seventy eight million Americans reached sixty-five in 2011. During approximately the next two decades somewhere between three and four millions will turn sixty-five each year. Naturally, the way the country views investments is going to change due to the enormous aging population. It is right to say: income funds will grow substantially over growth funds. It is also pertinent to establish the fact: that six trillion dollars in investments will be impacted by the Baby Boomers’ needs in supporting their lifestyles relative to retirement. It is estimated an additional seven trillion dollars in wealth, which has been inherited by Baby Boomers, will move into the picture during the same time capsule.
Persons who manage their financial portfolios in order to meet income requirements with a Graham-Dodd strategy are likely to experience success. Others who have a tendency to speculate will run the risk of achieving less success with their investments. However, the preceding thoughts aside: it is much more likely Baby Boomers will be advised to invest their money in small-cap stocks, by their finance advisors than shifting their money into any fund considered aggressive. It is also right to say: dividends will over-ride growth style investments for at least the next eighteen years. In other words, investments which provide The Baby Boomers with reliable income on a monthly basis will prevail over growth oriented portfolios—this is a given. Such investments include: stocks that pay dividends, certificates of deposit, and bonds.
Institutional investors naturally will look towards income as a major aspect of wealth building. Corporations, as a result of the aging Baby Boomers becoming a significant portion of the population will notice balance sheets with a great deal of distributions in way of dividends. The distribution of dividends will naturally shake matters up a bit: within the Corporate world.
Bonds originating from corporations with less than a 1:1 equity ratio will require a premium. Bonds from corporations which are more aggressive will be traded at high discounts. As a result these investment vehicles will be able to attain an increased yield: due to the conceptualized risk increase. At one time, the yield on the S & P 500 was ten percent. The question remains: Is it possible this could occur again in the future? The wave of the future as it pertains to the Baby Boomer generation finally growing into a maturing populous remains clear: The effect on investments, with growth funds accelerating proportionately is that of low debt and free flowing cash. It is a certainty that companies paying dividends will present more value than high growth organizations who are naturally indebted; and do not make it a habit of sharing a great deal of their profits with shareholders or stakeholders.
The Baby Boomer generation, as it continues to reach the age of 65 will affect the market in way of a surge in income funds. The income fund will easily prevail over growth fund during this eighteen-year period of time. Corporations offering sustainable dividends will be sought over corporations that offer little if any income to their active participants.
Author Bio
Joshua Turner is a writer who creates informative articles in relation to business. In this article, he describes the affects of baby boomers on investments and aims to encourage further study with a USC Masters in Gerontology.
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Category: Investing
