Each generation faces differing events and challenges that impact their investment strategies. Which type of investor are you?
The Traditionalist Generation (1925-1945):
Defining events: The Great Depression, lunar landing, WW I & II, Korean War, Peace Corp, McCarthyism, JFK assassination, Martin Luther King Jr. assassination
Traditionalists are generally a financially conservative generation. In fact, 49% of Traditionalists have more conservative risk tolerances, while only 10% are more aggressive investors. Traditionalists experienced employment stability, pension plans, and assured social security, leading to over half of Traditionalists with assets in annuities, and 87% with savings, investments or insurance to provide additional retirement income.
The Baby Boomer Generation (1946-1964):
Defining events: Watergate, Vietnam, women’s liberation and feminism, Roe v Wade, Civil Rights Movement, selective service
Boomers balance the liberalism of their youth with conservatism from age and years of family demands. 41% of Boomers have more conservative risk tolerances while 16% are more aggressive. While Boomers hope to receive retirement assets from employer-sponsored plans these plans are disappearing, leaving many late to realize the necessity of investing. They are currently facing the unique position of allocating unexpected income (parents’ trusts, real estate and other assets) while aiding the financial needs of their children. This has lead them to look toward longer-term income-producing investments with low volatility.
Generation X (1965-1980):
Defining events: Challenger explosion, “Black Monday,” Cold War, fall of the Berlin Wall, end of apartheid in South Africa, sale of the first Macintosh computers, rise of the AIDs epidemic, the Internet
Generation X witnessed the rise of technology, making them more entrepreneurial, independent, and goal-oriented. 23% of Generation X exhibit more conservative risk tolerance, while 31% are more aggressive. They started careers as cutbacks began on pensions and healthcare benefits. Additionally, nearly 30% of people in their 30s and 40s (includes early Millennials), still possess outstanding school debts. After paying debts, Generation X places priority on saving for housing and children rather than retirement. They view themselves as permanently on the cusp of financial disaster, minimizing their investments.
Defining events: Desert Storm, Iraq War, 9/11, Oklahoma City Bombings, Global Financial Crisis and Great Recession, social media, schoolyard violence, environmental impact awareness, Googling, multiculturalism.
Millennials witnessed an economic collapse, often referred to as “the Second Great Depression.” This impacts their investment decisions. In fact, 59% of Millennial investors say avoiding risk is their top priority. Investors, however, are few. With 37% of 18 to 29 year olds unemployed, 44% of recent college graduates underemployed (part time or in jobs that require no degree), and the highest student loan debt in history, Millennials are slow to invest. Those who are investing, however, ensure that their investments are aligned with their philanthropic interests. In fact, Millennials ranked “social responsibility” in their investments higher than any other generation.
Which of these categories describes your investment style? The beauty of a self-directed IRA is the flexibility to manage your own investments. This allows you to match your investment risk comfort with your investments based on your own knowledge of investment. Contact Mountain West IRA to learn more about self-directed IRAs.