Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 232

Two 60th birthdays: the S&P500 Index and me

The S&P500 Index reached 60 years earlier in 2017, and it's my turn this week.

(The S&P500 was called the 'Composite Index' prior to 1957 and included 90 stocks).

S&P has produced this graphic on how the world has changed in my lifetime. Very kind of them.

I have gone from being one of 2.9 billion people to one of 7.4 billion. The S&P Index has increased from 44 to 2,396, showing the power of long-term investing. The number of industrial stocks in the S&P500 has fallen from 425 to only 68.

Source: S&P Dow Jones Indices. See Indexology, December 2017 edition. 

The following chart of the S&P500 (non log scale, not inflation-adjusted) between 1957 and shows the recessions in the grey bars, and on this scale, the tech-wreck around the years 1999 to 2000 and the GFC from 2007 hit the market hard. But what an amazing recovery since the start of 2009.

60 years of the S&P500

Source: Macrotrends

My longevity and investing

While the S&P500 will outlive me, according to this longevity calculator, which asks questions specific to me, my life expectancy is 92 years. So even at my 'mature' years, I should have an investment horizon of at least 32 years, requiring a decent allocation to growth assets. We will also have amazing medical breakthroughs in the next decade or so that will extend life expectancy beyond our wildest estimates.

Please comment on life from 60 and beyond. What lessons have you learned, what can I expect, how should 'older' people view their investment horizon, what is most important?

 

Graham Hand is Managing Editor and Co-Founder of Cuffelinks.

 

12 Comments
AlanB
January 01, 2018

As someone on the tail-end of the baby boom I have always watched, followed, benefited and learnt from the experiences of my slightly older cohort as we went through teenage rebellion, far out and groovy hippy years, degrees, marriages, families, mortgages and now into retirement. I've found Peter Thornhill’s approach to be a logical and proven long term investment strategy. Buy fully-franked, sustainable dividend producing shares and ride out, if not benefit from the slumps. Dividends do not have the volatility of share prices and dividend growth is currently better than inflation and wage growth. An initial 3%pa yield on purchase becomes over time with sustained dividend growth a 6-9-12%+pa yield. So for dependable long term retirement income one becomes an investor in income producing assets and not a speculator focussed on price fluctuations. Sure there have been some duds and disappointments (MYR I'm looking at you), but mostly successes (ANZ, EVT, FLT, MQG, SHL).

Kathie
December 31, 2017

Heartiest congrats on achieving 60 years – the new 40 years. Here’s to a continuing very readable and informative Cufflinks.

Ron Keyhoe
December 29, 2017

Happy Birthday & Merry Christmas,

I followed State Bank of Victoria (SBV) advisors when the SBV folded & decided to do my own investing. Now at 76, I still believe in growing my SMSF & enjoying the ups & downs, which also keeps my brain active. My investment procedures have changed since I started at 50. Now I look for growth preferably with FF dividends, even if the yields are lower than the Banks.

I enjoy Cuffelinks articles. Keep up the good work. Live Long & Happily.

Peter
December 28, 2017

Graham

I agree on growth assets.
Being just over 60 with parents in their nineties I think I have 4 to 5, 7 year growth asset periods left in me and psychologically can cope with the downturns.

So I am all for growth assets

Richard Cowan
December 24, 2017

Hi Graham,
Happy Birthday and Merry Christmas to all.
I've also recently hit the ripe old age of 60, so I feel for you :)

I'm reminded of the great Jack Bogle, founder of Vanguard and a true giant of the investment industry. He famously said many years ago that you should "have your age in bonds" i.e. age 50 = 50% of your portfolio should be in bonds, 60 years of age = 60% etc.

I think this advice was relevant when people retired at 65 and popped off around 70-75.
As you say, we are now living much longer than previous generations and advances In medical technology and techniques will drive life expectancies ever higher in future.

Jack Bogle's advice is arguably now out of date and not helpful for people of say 50-70 today.

We need to have investment horizons of decades, not a few years and thus maintain a decent allocation to growth assets. This will provide a growing source of income in future to keep up with inflation; the real enemy of retired people.

My investment horizon is predicated on my wife living until 100 or more (she turns 60 next month, but has better genes than me), so I'm looking to invest for the next 35-40 years minimum. I think we need to learn to live with market volatility, but perhaps try to avoid large drawdowns with a well-crafted diversified asset allocation.

The old age in bonds formula is also perhaps looking rather risky these days, as rates appear to be on the rise from emergency GFC levels and long-term fixed-rate bonds will see falling capital values. Recent US research even argues for retirees increasing their allocation to growth assets, rather than the previous wisdom of increasing exposure to fixed interest securities.

Gary M
December 24, 2017

The infographic is only a few data points but they show how low income earners in the US have missed out. While the S&P has risen over 50 times (and the wealthiest have most in the market), minimum wages have risen only 7 times (and how does anyone live on US$7 an hour?) and gasoline is up 10 times. So they voted for Trump and people wonder why they reacted against the system.

Steve
December 22, 2017

Happy birthday Graham. I am a 57 baby as well, but I have almost a year on you, so I am an old timer at being over 60!!

When I look at friends and family in their 70s or 80s, they had a complacency on reaching retirement that they had their house and some modest investments and the pension or part thereof. Nothing can go wrong from here! I really think that in past generations people have had their heads in the sand at retirement. The big medical bills are yet to come; there is the possibility of travel for another 20 years, downsizing may not necessarily put capital back in your pocket, and at some stage there could be the need for home care or worse, a nursing home. As you have suggested, the investment horizon is huge at 60 and so my advice to others is to layer the investments to provide some layer of investments for income and some to growth. Hopefully it will just go to providing intergenerational wealth or bequests, but if the money is needed in later years, it is nice to be able to do things like hospitals and nursing homes, comfortably.

I leave one financial tip. When people consider growth they often think of assets that are non or low dividend paying high risk shares. But, if you focus on stable blue chip shares that have a sound and sustainable dividend policy and you put say 30% of the dividends into a DRP, that is a great way to grow wealth and the DRPs can always be switched off if you need the income. (Of course LICs or the like that focus on these types of investments would possibly be even better.)

Chris D
December 21, 2017

Happy B’Day Graham. You never know with increasing life expectancy you may only be at the half way point.

Martin
December 21, 2017

Happy Birthday, Graham,

Well done on another year of Cuffelinks and thank you for sharing the Infographic on 1957/2017.

Best wishes,

Martin

Martin
December 21, 2017

Graham - happy 60th ! Personally I like Peter Thornhill's (Motivated Money) approach to time horizons (and asset allocation) when investing. Don't see any reason to change that view simply because we hit an age number people consider 'old' or 'retirement' linked !

Warren Bird
December 21, 2017

Happy birthday Graham. I had my 60th a few weeks ago.

Is one month's experience as an over 60 of value? The main thing I can say is to value your health and your health insurance. I got a clean bill of health last week after some significant issues in the second half of this year, but a month in hospital, 3 operations and associated medical services, on top of a more routine operation late in 2016, have added up to almost $40,000 paid out by my private fund and Medicare in 12 months.

Makes me hate those Youi ads even more! It's not about short term 'rewards', it's about the community sharing risks and you being covered for when you need it.

Alex
December 20, 2017

I once read Burton Malkiel, who I think was about 85yo, say his investment horizon is many decades because he is primarily focussed on bequeaths, so he thinks in terms of his money helping the next generations.

 

Leave a Comment:

     

RELATED ARTICLES

Three major financial goals after retirement

banner

Most viewed in recent weeks

Unexpected results in our retirement income survey

Who knew? With some surprise results, the Government is on unexpected firm ground in asking people to draw on all their assets in retirement, although the comments show what feisty and informed readers we have.

10 reasons wealthy homeowners shouldn't receive welfare

The RBA Governor says rising house prices are due to "the design of our taxation and social security systems". The OECD says "the prolonged boom in house prices has inflated the wealth of many pensioners without impacting their pension eligibility." What's your view?

Three all-time best tables for every adviser and investor

It's a remarkable statistic. In any year since 1875, if you had invested in the Australian stock index, turned away and come back eight years later, your average return would be 120% with no negative periods.

The looming excess of housing and why prices will fall

Never stand between Australian households and an uncapped government programme with $3 billion in ‘free money’ to build or renovate their homes. But excess supply is coming with an absence of net migration.

Five stocks that have worked well in our portfolios

Picking macro trends is difficult. What may seem logical and compelling one minute may completely change a few months later. There are better rewards from focussing on identifying the best companies at good prices.

Six COVID opportunist stocks prospering in adversity

Some high-quality companies have emerged even stronger since the onset of COVID and are well placed for outperformance. We call these the ‘COVID Opportunists’ as they are now dominating their specific sectors.

Latest Updates

Retirement

10 reasons wealthy homeowners shouldn't receive welfare

The RBA Governor says rising house prices are due to "the design of our taxation and social security systems". The OECD says "the prolonged boom in house prices has inflated the wealth of many pensioners without impacting their pension eligibility." What's your view?

Interviews

Sean Fenton on marching to your own investment tune

Is it more difficult to find stocks to short in a rising market? What impact has central bank dominance had over stock selection? How do you combine income and growth in a portfolio? Where are the opportunities?

Compliance

D’oh! DDO rules turn some funds into a punching bag

The Design and Distribution Obligations (DDO) come into effect in two weeks. They will change the way banks promote products, force some small funds to close to new members and push issues into the listed space.

Shares

Dividends, disruption and star performers in FY21 wrap

Company results in FY21 were generally good with some standout results from those thriving in tough conditions. We highlight the companies that delivered some of the best results and our future  expectations.

Fixed interest

Coles no longer happy with the status quo

It used to be Down, Down for prices but the new status quo is Down Down for emissions. Until now, the realm of ESG has been mainly fund managers as 'responsible investors', but companies are now pushing credentials.

Investment strategies

Seven factors driving growth in Managed Accounts

As Managed Accounts surge through $100 billion for the first time, the line between retail, wholesale and institutional capabilities and portfolios continues to blur. Lower costs help with best interest duties.

Retirement

Reader Survey: home values in age pension asset test

Read our article on the family home in the age pension test, with the RBA Governor putting the onus on social security to address house prices and the OECD calling out wealthy pensioners. What is your view?

Sponsors

Alliances

© 2021 Morningstar, Inc. All rights reserved.

Disclaimer
The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. Any general advice or ‘regulated financial advice’ under New Zealand law has been prepared by Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892) and/or Morningstar Research Ltd, subsidiaries of Morningstar, Inc, without reference to your objectives, financial situation or needs. For more information refer to our Financial Services Guide (AU) and Financial Advice Provider Disclosure Statement (NZ). You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.

Website Development by Master Publisher.