Making Money Investing Should Not Be This Easy (or maybe it should be)

Since the Great Financial Crisis (GFC) of 2007-09, the performance of the major indices have been nothing short of miraculous.

At the nadir of the crisis, the bottom, on March 9, 2009, the Dow Jones Industrial Average stood at 6,547.05. It closed Wednesday at 28,745.09, an tidy increase of 439%. Nearly 11 years later, that's an average annual return of 39.9%, or, for the rounders amongst us, 40 percent per year, on average.

Imagine, a $100,000 investment right at the bottom of the market would be worth $439,000, and that's just on 30 stocks that comprise the Industrials, without adding in dividends, which could have been reinvested and made even more money. It's absolutely ludicrous that such an easy investment strategy - buying and holding an index fund, for instance - could generate such awe-inspiring returns. That gain of $339,000, or, $30,818, non-compounded, is more than most Americans make in a year. Incredible.

What this shows is that anyone who had a retirement fund and didn't touch it during the crash of 2008, is probably pretty smug and comfortable right about now. Such people would be mostly Baby Boomers, people born between 1946 and 1965, who were, in 2008, as old as 62 or as young as 43 and are now between the ages of 54 and 73.

Many from this age group have already retired. Some are headed that way, and, if the market holds up, many will take early retirement at age 62, if not sooner (59 1/2 for those with IRAs or 401k plans). This is an enormous portion of the population, about 23% of all the people (legally) living in America.

Now, not every Baby Boomer had 100,000 in their investment account in 2008. Some had more, some had less, some had none, but, without a doubt, there are some very fat and sassy old folks out there, hoarding their gains, figuring out how long their money will last if they start withdrawing a little here, a little there, mostly more or less on a plan to live until they are 85 or 90, because that's the general life expectancy these days.

All of these people will also collect Social Security, adding anywhere from $400 (slackers) to $2,788 a month to their income. There's a lot of money out there, much of it still being invested.

While this all sounds like economic Nirvana, there is one no-so-small caveat. In a word, it's inflation. In more words, it's the cost of living. Everything is more expensive today than when the Baby Boomers began investing, so it's eroding their profits, though they're still pretty well off, because, as young people will learn and older folks already know, costs of living (outside of severe medical expenses) are lower when you're older. You eat less, go out less, need less of everyday items because you already own them. You drive less, and, probably, you save more.

Even discounting the effects of inflation (a new car in 1970 could be purchased for less than $2000; today's it's generally more then $20,000, often much more), these Baby Boomer retirees are going to be pretty well off, even if Social Security runs out of money and is forced to reduce benefits.

As much as people today bemoan the great inequality of incomes and wealth, this one group, Baby Boomers, were born into and continue to live in a pretty sweet spot, when the economy was good, if not great, and life in the United States of America was one of general peace and tranquility. America is still a very solid country in the grand scheme of things, and maybe the complainers and nay-sayers could do themselves and everybody else a favor by working just a little bit harder, saving just a little bit more, complaining just a little bit less.

Nobody can predict the future, but who knew, 11 years ago, that American stocks would provide so well?

Millennial food for thought.

At the Close, Wednesday, January 8, 2020:
Dow Jones Industrial Average: 28,745.09, +161.41 (+0.56%)
NASDAQ: 9,129.24, +60.66 (+0.67%)
S&P 500: 3,253.05, +15.87 (+0.49%)
NYSE Composite: 13,934.44, +36.00 (+0.26%)