Generation X: Investing in the Stock Market

Generations X (Gen-Xers) or “The Forgotten Generation” are born between 1965 and 1980. Compared to Baby Boomers, Gen-Xers take more financial risks in making investment decisions given their earnings increased over the years. Compared to Millennials, GenXers are also in better financial positions for several reasons. Gen-Xers are further along in their careers, and; thus, higher up on the salary scale. They are also spared by the increasing student debts that are crippling younger generations. 

When it comes to investing in the stock markets, Gen-Xers are known to be better investors. Their investment strategies are managed by either utilizing a financial professional or guided by their financial priorities, such as retirement and security. Other reasons that impact how Gen-Xers invest in the stock market include short-term objectives, such as saving up for a home, putting money away for education, and balancing the needs of children and aging parents. Regardless of what the reason is, investing money into the stock market is based on your risk tolerance and your expectations of the stock market.

There are two investment objectives to consider when positioning oneself in the stock market.

Long-Term Objectives

For the year 2021, the U.S. retirement age is 67 years old to receive full retirement benefits. Gen-Xers are about 10 to 25 years away from retirement, which allows them to have a higher aggressive approach to investing for long-term needs such as retirement. Trading in the stock market or investing in a diversified portfolio or mutual fund dominated by stocks are riskier investments. These investments are considered more aggressive than, for example, a portfolio or mutual fund made up of bonds due to the increased rate of long-term return. The S&P 500 Index is a widely followed index that is composed of 500 widely held U.S. stocks. This index provides informative details when considering investments in the stock market.

In 2016, a New York University conducted a study from 1928 to 2016 that compared the growth of $100 invested in the stocks on the S&P 500 Index versus $100 invested in U.S. Treasury Bills. Based on this study, The T-Bill investment has grown less than $2,000 ($1,988) while the stock investments have grown to more than $300,000. 

Average Returns of Different Assets, 1928-2016
Assets Average Geometric Returns Growth of $100
S&P 500 9.50% $ 328,584
3-month Treasury Bill 3.40% $ 1,988
10-year Treasury Bond 4.90% $ 7,111

Please be advised this past performance is not an indicator of future results.

Short-Term Objectives

On the other hand, you may consider less aggressive investment strategies if the intention is to save for goals other than retirement. This does not mean you can’t invest in the stock market. Instead, you may achieve a less aggressive investment strategy by simply diversifying your current investment portfolio by combining less volatile investments in addition to stocks. This can include a combination of bonds, bond funds, or other types of investments. In this approach, diversification reduces likely losses due to market fluctuations. 

Gen-Xers experienced more financial advantages when it comes to achieving retirement or other goals through the stock market. Gen-Xers encountered increasing income from steady employment and also increasing savings from smarter financial decisions. Besides, there will always be steps to take when it comes to achieving personal wealth and retirement. Gen-Xers can meet more of their financial goals if they decide to take action and invest knowledgeably in the stock market

Tagged with: