Boomers Break The Mold, Choose Stock-Heavy Portfolios Over Bonds: WSJ

Retirees in America are increasingly behaving like 30-year-olds when it comes to investing, with a growing number choosing to keep a significant portion of their portfolios in stocks, The Wall Street Journal reports.

Investment Shift

Contrary to the traditional advice of shifting from stocks to bonds as they age, many retirees are opting to take the risk. According to Vanguard, nearly half of its 401(k) investors over age 55 who actively manage their money held more than 70% of their portfolios in stocks. This trend is not limited to baby boomers, as even investors aged 85 or older are showing a similar inclination toward stocks.

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Risky Business

While this approach can yield higher returns, it also carries significant risks. A market downturn could force retirees to sell their shares at low prices if they need cash. Despite these risks, many older Americans are drawn to stocks due to their superior returns compared to bonds and the lack of appealing alternatives.

Boomers’ Bullishness

The bullishness of older investors on stocks is largely driven by the impressive returns they have witnessed. Since 1982, the S&P 500 has returned 10.1% a year on average, significantly more than its long-term average annual return of 7.4% since 1928. This experience has shaped their risk-taking behavior, making them more willing to take financial risks than those who lived through the Great Depression.

DIY Investing

Unlike younger generations, baby boomers are more likely to manage their investments themselves. Among baby boomers with 401(k) accounts at Fidelity Investments, 53% pick their own investments, compared with 42% in Generation X and 25% of millennials.

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