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Babies born in 2024 can begin their investment journey with all sorts of savings and tax free products but they won’t see their prime earning years play out until 2050 to 2090 withtheir theoretical retirement age leading into the 22nd Century!
My financial advisor correcting me on when I can I retire after raising 3 kids
What the hell should a portfolio look like if you start investing for your kid in 2024 and have a 75 year time horizon?
60/40 stocks & bonds?
25/25/25/25 -Cash, stocks, long term bonds, commodities?
Perhaps Bitcoin will rule them all?
A few fun reflective thoughts on history below for considering the markets of the future -
Equity Returns
Pulling back to a longer term view, despite the volatility and boring periods of sideways action, equities do just keep on chugging over decades if you buy and hold.
Log Scale!
The S&P500 index has returned a historic annualized average return of around 11.88% since its 1957 inception through the end of 2021. Going back all the way to the 1890s shows U.S. equities are tough to beat over any 20 year timeframe!
Debt Returns
Bond returns on the other hand, are less volatile in short time frames but also have far less obvious drift in single positive direction over the long term.
From the founding of the country in 1789, bond yield charts look more stochastic with repeated booms and busts despite their reputation as safe investments.
Most recently, we’ve seen a major change of direction for yields which could be the beginning of a much longer timeframe for generally higher rates. But will high rates last into the middle of the century or are they just a temporary buying opportunity before reverting to the middling returns of days past?
Cash Returns
When money managers say, “hold in cash”, they really mean money market instruments. i.e. savings and CDs or possibly short term treasury bills. Often considered the runt of the litter for returns, keeping readily available cash on hand is really only good for 2 things:
Emergency liquidity
Dry gun powder when a sale comes around
Money Markets are the Fredo of investment categories
My Portfolio Guess
With history as a guide, I believe starting to save and invest for a child born in 2024 may be timing the next generation stellar 60/40 stocks/bonds portfolio perfectly.
They can start buying up long term bonds with >5% returns from day 1.
If rates rise, they can buy in more. If rates fall, they can hold their gains
Equity returns are likely going to be middling for the first decade or so allowing them to build a contribution base now for when the next secular bull run kicks in down the road
Overall, by starting now, a kid may be legging into the best portfolio starting point since the late 1970s!
1970s analog of today
TRADERDADS MAILBAG
Thoughts? Questions? Comments?
Reach out! Maybe I’ll do a full post on the topic or as a Q&A
