Will retiring baby boomers spark a stock market bust? - CBS News
A number of people have asked for my thoughts on this blog post from Lightfield Capital about the potential for baby boomers to take down the stock market in the coming years from forced sales during retirement. This very well could be true. People are woefully unprepared for retirement.
These people are going to have to take more risk in their investments to make up for it. Whether or not this will work is another question, but my guess is lots of investors will be more overweighted in stocks than investors were in the past out of necessity. Add to this the fact that people are living longer and there should be a higher demand for stocks from retirees than in the past.
Stocks are still relatively low in terms of household asset allocations when you look at the data:. Plus I think the allocation to stocks has room to grow from current levels.
Investing has changed dramatically in recent decades. Financial advisers, robo advisers, ETFs, target-date retirement funds and auto enrollment have all made it far easier for investors to broadly diversify their portfolios.
In the past, many investors would choose the safety of stable value funds or bond funds in retirement accounts, but the new focus on asset allocation means stocks are emphasized more than they were in the past. RMDs can be reinvested elsewhere. There will likely be a huge private-to-public transfer of assets. Those funds are transferring from private to public markets to get more diversified. Households have been net sellers of stocks for years. Surprisingly, households — and those acting on behalf of households such as pension funds — have been net sellers of stocks for years.
Institutions, corporations, and professional investors have picked up the slack from these household sellers. Someone has to buy those shares. That money will go to corporations — who will be the likely buyer in many instances in this case through buybacks of their own shares. Millennials will pick up the slack eventually.
3 Rock-Solid Stocks to Buy Before the Next Market Crash -- The Motley Fool
This demographic is now larger than the baby-boomer cohort, and once they start reaching their peak earnings years they will be saving and investing more money. Demographics are widely known. Future returns could be lower with or without selling pressure from this demographic. If anything, this would be a gift, not a curse for the next generations.
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Home Investing Stocks Outside the Box Get email alerts. Stocks are still relatively low in terms of household asset allocations when you look at the data: More from Ben Carlson: APR Last Week 6 Months Low Interest We Want to Hear from You Join the conversation Comment.
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