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Investment-lifetime comparison: me vs. my father

September 11, 2011

Like many of my contemporaries, I often find myself at political odds with my parents. I always find this strange, because I don’t feel that I rejected the values of my parents. My concerns for the workings of the economy and the country, my concerns that we practice responsible stewardship of the Earth, my feelings of what kinds of business behavior is moral and good for society and what isn’t, my concerns for security and what we trade for it, etc. came fairly directly from my parents. I learned my ethical patterns and moral sensitivities from Mom and Dad. However, I am pretty sure we reliably vote for different politicians (and a different set of ideas!). I have only anecdotes, but this pattern seems to be repeated with many of my contemporaries.

What experiences were different for my parent’s generation and mine? Can any of these differences help account for similar values leading to opposing politics? I am not sure this explains much, but below is a pair of charts that illustrate one way in which my parent’s experience and my experience lead us to see things differently. I did the analysis below out of curiosity, but I decided to write it up after I realized a similar analysis could be done with health care costs or income gains, neither of which have evolved in our favor in the last 15 years. (For broader perspective and context on where the S&P is now relative to the past, check out advisorperspectives.)

The scenario I modeled was investing for retirement: Imagine that at 30 years old, both my father and I have resources and get serious about investing. We invest the same amount of money every year until age 65, for my father, this is the period from 1966-2001, for me, the period from 1996-2031.

During the 30 years my father invested, the stock market did this:

He ends up with 7.23 times the money he put into the market. (Simple model: invest and compound gains (losses) on the first day of each year.)

During my investment lifetime, the stock market has done this:

And I am faced with the realisation that I currently have 1.18 times what I have put into the market–I have gained 18% in the last 15 years.

One clear perspective difference is that my father is looking back on the last 20 years of gains as the model for what his and his peer’s individual investments got him. I, on the other had am looking forward to 20 years of investments with uncertainty. My 15% gains are more appropriately compared to my father’s 41% during his first 15 years of investing. Clearly, the bulk of my father’s gains come in the second half of the cycle, the last 20 years. But at the point I am in my life, he was well ahead.

I doubt the important difference is so much how things happened in the past as how things appear to be going forward. What sort of action do I believe will significantly and positively influence the outcome of prosperity for myself and my family and my community? Is this very different from the sorts of actions my father believed were effective at the same point in his life?

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2 Comments leave one →
  1. September 11, 2011 5:15 pm

    As the older sibling to Dr. Skippy, I too find it interesting how we are so alike and yet think we are not.

    Perhaps its the amount of chocolate I have consumed over time.

    Perhaps.

  2. September 14, 2011 3:26 pm

    We would have made a ton if we could have timed the market!

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