In 1997 William Strauss and Neil Howe published The Fourth Turning: An American Prophecy. The premise of this fascinating book is that American history has gone through a cycle of recurring "seasons," brought about by a repeating sequence of four generation types.1For example, they posit that the generation that came of age after the Civil War and were responsible for Reconstruction and the great industrial expansion, shared a similar mindset with the Baby Boomer generation born 80 years later. In both cases they were characterized by idealists looking for ways to move forward after a societal crisis marked by the assassination of an admired President.The Fourth Turning has been highly influential, especially among business and political leaders, and like any sweeping theory has also had its critics. But there's no denying that people born around the same time will have their attitudes shaped in similar ways by their environment. For example, those who lived through the senseless carnage of WWI were extremely reluctant to enter WWII.In the same way, your attitudes and expectations about investing are heavily influenced by the financial environment in which you first started putting money away. And those, in turn, affect your investing behavior.A recent study by Vanguard found that the year investors first started saving could be correlated with how much stock they owned. "The median investor who started in 1999, as the dotcom bubble swelled, still had 86% of their portfolio in stocks in 2022. For those who began in 2004, when memories of the bubble bursting were still fresh, the equivalent figure was just 72%."2In other words, investors who opened accounts during a boom are likely to retain a significantly higher allocation of equities decades later.The prudent investor will point out that your equity allocations should be determined by your current risk tolerance, investing time horizon, and retirement goals—not your feelings about how the market treated you 20 years ago. This holds true whether you're prone to being overly optimistic or pessimistic.One of the most valuable roles your trusted advisor plays is that of a neutral party who can develop your plan based on proven principles and your unique financial circumstances, leaving investing beliefs and emotions out of the equation. Run ups and corrections will always mark the day-to-day behavior of the market. But your best chance for retirement success is a strategy of steady discipline and long-term consistency.
Sources:1. http://go.pardot.com/e/91522/E28093Howe-generational-theory/94s92p/2228670158/h/_AAZdkyYJoo551w3uwFaTTaQyckMVzacO6lZSuAFW2o2. http://go.pardot.com/e/91522/-market-shapes-your-portfolio-/94s92s/2228670158/h/_AAZdkyYJoo551w3uwFaTTaQyckMVzacO6lZSuAFW2oDisclosure:The views expressed herein are exclusively those of Efficient Advisors, LLC (‘EA’), and are not meant as investment advice and are subject to change. All charts and graphs are presented for informational and analytical purposes only. No chart or graph is intended to be used as a guide to investing. EA portfolios may contain specific securities that have been mentioned herein. EA makes no claim as to the suitability of these securities. Past performance is not a guarantee of future performance. Information contained herein is derived from sources we believe to be reliable, however, we do not represent that this information is complete or accurate and it should not be relied upon as such. All opinions expressed herein are subject to change without notice. This information is prepared for general information only. It does not have regard to the specific investment objectives, financial situation and the particular needs of any specific person who may receive this report. You should seek financial advice regarding the appropriateness of investing in any security or investment strategy discussed or recommended in this report and should understand that statements regarding future prospects may not be realized. You should note that security values may fluctuate and that each security’s price or value may rise or fall. Accordingly, investors may receive back less than originally invested. Investing in any security involves certain systematic risks including, but not limited to, market risk, interest-rate risk, inflation risk, and event risk. These risks are in addition to any unsystematic risks associated with particular investment styles or strategies.