Old Mistakes Made New Again 

Gary Silverman, CFP® |

By Gary Silverman, CFP®

Dear Millennial:

First, let me tell you who you are. For the most part, you are between 22 and 37-years-old. Your group is almost as large as the biggest group, the Baby Boomers (of which I am a part). Don’t worry, we’re starting to die off, so you’ll be ahead population-wise in a few years.

Some call you the “connected” generation. While I admit to looking at my phone too much, it’s hard to find when a Millennial isn’t looking at theirs. Okay, that’s a gross exaggeration, but you are also very unlikely to read a newspaper, so you don’t know I said that. (And if you are reading this in paper form, I was talking about those other Millennials.)

While you were alive for the financial crisis (or, if you prefer, the Great Recession), you were a child then and didn’t have to concern yourself. What you did experience is the aftermath—one of the greatest stock market recoveries ever. While poor Generation X went through not one, but two tremendous drops of the stock market, many Millennials have only seen up, a lot of up, in the stock market.

And that can be a problem.

This same thing happened back in the late ‘90s. Then there was the creation and growth of all things internet-related. Stocks were shooting sky-high and everyone thought investing was easy. When folks came into my office, they said something like this: “I’m a conservative investor and don’t want to take much risk, so I’ll be happy with just a 20% return in my portfolio.” 

When I tried to explain to them that the average across time for a 100% stock portfolio was around 10%, they’d just explain to me that “everyone” was making 25, 35, or even 50% a year in the stock market. And some were. That was the tech bubble. When it burst, the markets came tumbling down, with tech companies (if they survived) tumbling farther and faster. 

In a recent survey by the Capital Group, Millennials said that they expected an annualized 16% return on their money from now until they retire. Now, I can’t say that they won’t get an average return of 16% on their money across 20-30 years; all I can say is that looking back at history I can’t see an example of that ever happening.  

Now before you think negatively about this generation of folks, realize they are only a product of their time. They haven’t been invested during market cycles. What’s nice is they are much more likely than prior generations to be working on their financial plans and tracking their budgets (it’s easier with a variety of apps available today). They are also quite willing to ask for advice rather than thinking they have to do everything on their own.

In time they will learn that 16% returns are not normal, nor should they be expected and that market downturns are not something to flee, but rather to take advantage of. Good lessons for any generation.

Gary Silverman, CFP® is the founder of Personal Money Planning, LLC, a Wichita Falls retirement planning and investment management firm and author of Real World Investing.