Outperformance by passively investing in the S&P is merely a temporary demographic phenomenon (trading, 401k)
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
Not many "investors" sell their investments when the investments are doing well. As mentioned, the stock market as a whole is doing rather well over the past decade. Yes, there has been a bit of a correction in the past couple of years, but in recent months the stock market has moved back up and gained back a good bit of what it lost a couple years ago. If retirees have held onto their stock investments, and I think that most of them have, then I don't agree with your premise that "many baby boomers are selling."
This is not some radical idea I came up with on my own. It's been widely discussed for decades. Unless a person has other sources of income, say a pension, rental properties, or a business... they will likely be using financial assets (stocks, bonds, bank deposits) to fund their retirement, along with their Social Security benefit.
Sure, you may know people who never plan to sell any of their stock investments; their kids will end up inheriting it all. I doubt those people are in the majority, but it would be interesting to see some hard data on the topic.
A lot of people such as the OP may be surprised to learn that their assumptions about the spending and investment habits of retirees are not correct. For example, the OP's point of view is that a person retires and then begins drawing down their retirement investments to pay for their living expenses.
In reality, most of the retirees that I've talked to have MORE money in their investments, stock market, etc today than they did when they first retired. In other words, their net worth had INCREASED in the decade or so since they retired rather than diminished. Their stock portfolio had doubled or tripled.
While this is not true for everyone, I think it is true for a considerable portion of retirees. I know that it's true for me and judging from the lifestyle of many retiree acquaintances that I know, I'm pretty sure that it's true for them too.
I think that's true.
Something like 10% of the people own 90% of the shares in the stock market. Most of those people are only taking out a small slice of dividends/capital gains, leaving the excess for compounding, so that their overall balances are higher than when they retired.
A lot of people such as the OP may be surprised to learn that their assumptions about the spending and investment habits of retirees are not correct. For example, the OP's point of view is that a person retires and then begins drawing down their retirement investments to pay for their living expenses.
In reality, most of the retirees that I've talked to have MORE money in their investments, stock market, etc today than they did when they first retired. In other words, their net worth had INCREASED in the decade or so since they retired rather than diminished. Their stock portfolio had doubled or tripled.
While this is not true for everyone, I think it is true for a considerable portion of retirees. I know that it's true for me and judging from the lifestyle of many retiree acquaintances that I know, I'm pretty sure that it's true for them too.
we have spent down 6 figures a year for 7-1/2 years from our portfolio and we are still higher then the day we retired .
at. a 4% swr a 60/40 has left you with more then you started 30 years later 90% of the rolling 122 30 year periods we have had to date .
67% of the time it left you with 2x what you started and 50% of the time 3x what you started with
The biggest correction (drop) in stock market value a couple of years ago was in the top 5 or 6 stocks in the S&P 500. If a person shied away from those top few stocks, the correction was rather mild.
The drop in small-caps was heinously brutal. Small caps have been lagging for 20 years. ever since the recovery after the dot-com bust. They were especially mauled during the Great Recession, and have been doing OK after the Covid dip. In early 2021, the Russell-2000 reached a high-water mark of 2400 or so. It spent the remainder of 2021 falling, so that already by December 2021, near the zenith of the S&P 500, small-caps were already in a "correction". The Russell-2000 fell much further in 2022. Today it's sitting at 1750-1800, which is about a 25% drop from the March 2021 peak (so, 25 months ago!)... and that's now, after a "recovery".
Not many "investors" sell their investments when the investments are doing well. As mentioned, the stock market as a whole is doing rather well over the past decade. Yes, there has been a bit of a correction in the past couple of years, but in recent months the stock market has moved back up and gained back a good bit of what it lost a couple years ago. If retirees have held onto their stock investments, and I think that most of them have, then I don't agree with your premise that "many baby boomers are selling."
The biggest correction (drop) in stock market value a couple of years ago was in the top 5 or 6 stocks in the S&P 500. If a person shied away from those top few stocks, the correction was rather mild. I had/have very little invested in the S&P 500 index because I consider it to be "top heavy", i.e. unduly influenced by the performance of the top 5 or 6 stocks. I prefer investing in ETF's in the VALUE segment of the market which has done considerably better than the index itself. I've also invested considerably more in international stocks than US stocks because I believe that on whole, they offer better value than most US stocks.
The biggest correction for the S&P has yet to come. I’m of the opinion that comes this Fall and I’m starting to believe more and more it will break below its October 2022 low.
The biggest correction for the S&P has yet to come. I’m of the opinion that comes this Fall and I’m starting to believe more and more it will break below its October 2022 low.
Could you please elaborate, on what is the basis for such prediction?
The biggest correction for the S&P has yet to come. I’m of the opinion that comes this Fall and I’m starting to believe more and more it will break below its October 2022 low.
If you’re so certain, which specific steps are you taking to position yourself to benefit?
So you are saying I can actually find a use for the middle school algebra they crammed into me?
Algebra is not appreciated enough, IMO. It's the one math I use almost every day, in numerous situations. I wish I had appreciated it more when I was first learning it.
As for the S&P, I think it has a place in portfolios. Whether that place is 20% or 40% or 60%+, that's an individual choice.
If you’re so certain, which specific steps are you taking to position yourself to benefit?
Earlier this month I raised a lot of cash. I’m roughly 75% cash right now. I’m selling weekly cash-secured puts on SQQQ and SARK to generate income as I await a pullback.
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
Algebra is not appreciated enough, IMO. It's the one math I use almost every day, in numerous situations. I wish I had appreciated it more when I was first learning it. 
