Baby Boomers – The future of the stock market

You have no doubt heard of the “Baby Boomers”, those individuals born
between 1943 and 1963. Following World War II, Australia’s population grew at
record levels. Australia was not alone in this phenomenon. The United States,
New Zealand and Canada all experienced Baby Booms at a similar time.

The Baby Boomers are an important phenomenon to understand. They have had
dramatic effects on society and will substantially impact the way the stock market
performs over the next 20 years. For this reason, it is important to understand some of
the background on this interesting group of people.

As mentioned, the Baby Boom was experienced in various countries around the
world. Part of the reason for the “Boom” was that these countries were immigrant
receivers and immigrants tend to be in their 20’s, the prime childbearing years. At its
peak in 1957, the US boom hit 3.7 children per family. Canada hit its peak in 1959
with Canadian women averaging 4 offspring each; that was over 479,000 new births
that year alone! Australia’s boom was not quite as big as the Canadian or US booms;
however, we still have a disproportionate number of people who are today in their
40’s and 50’s. Following the Baby Boom, we had a Baby Bust. Far fewer children
were born during the late sixties, leaving Australia with an asymmetrical population
graph.

The Baby Bust group, born between 1964 and 1976 are a much smaller group than
their predecessors and are commonly referred to as Generation X.

Baby Boomers are a very significant and important group. It is not that, individually,
they are any different than any other group who preceded them, it’s just that there are
so many of them. Due to their large numbers, Baby Boomers have had a significant
impact on our society, making substantial changes as they grew. They have changed
the economy, driven housing and other markets and transformed social attitudes and
lifestyles.

In Australia and North America today, the fastest growing industries, apart from
technology, are financial management, leisure activities and health care. It is very
easy to see why. Boomers have been working all their adult lives, usually for
someone else. They have raised their children and are now focusing on their
retirement. They have had a magnificent time. They have not endured wars, or a
depression like their parents and grandparents. They have enjoyed fantastic luxuries
such as cars, world holidays and computers. They have been at the forefront of the
age of discovery.

Unfortunately, the majority have not prepared themselves financially for their
retirements, believing instead that like their parents, they would enjoy a comfortable
pension from their employers and/or government. The stark realities are now coming
to light. Everybody, especially the Boomers, must take responsibility for their
financial futures. Our government will simply not be in a position to provide
adequate pension incomes for a growing number of retirees. Today, for every person
who is retired, there are four people working, providing income to the government.
By 2025, there will be only 2 people working for every retiree. What’s more, the
Boomers, as they start to retire, will live longer than any group before them, well into
their 70’s and 80’s on average. As a result, it is up to each of us as individuals to take
responsibility of our own personal financial planning.

The Australian government has made substantial improvements and preparations for
the growing populations. They have introduced a compulsory superannuation scheme
which all employers and employees must participate in and which is gradually rising
in required contributions, but it will be too little, too late. The key to investment
growth is time, a luxury many Boomers no longer possess.

Consider this fact, that at a return of 8% per annum, net of tax, an investment of
$30,000 would require over 15 years to triple in value, not even considering the
effects of inflation. Most investment strategies commonly promoted to the public
boast returns of 4% to 10% per annum. We often see managed funds, superannuation
schemes, bank term deposits and property investments offering such results. Many
people consider these returns appropriate and even good! Unfortunately, many
members of the public require a much greater return on their investments to
adequately improve their financial positions before they retire (if they can ever afford
to!).

In future issues we will explore ways of generating high returns and how to self
manage your own super.

Daniel Kertcher is a licensed stock market educator. Daniel has trained many people
from North America, Australia and Europe in various trading systems. Join his trading
mail list http://www.platinumpursuits.com and read more about him at his personal
website http://www.danielkertcher.com and http://www-cfds.com