95

Home Following Answer Spaces Notifications Search Quora Add Question

Quora uses cookies to improve your experience. Read More

Ask a Data Scientist From your Digest Improve Your Feed

Markets & Finance Follow 5 more

Jim Beekhuizen · July 8
Spaces
Former Financial Advisor (Top 50 in US for my firm)
Bad Algos
Will the next 10 years be a lost decade for the stock market after an almost Follow 20 more
Behavioral Value topics
10-year rally?
Investor
Upvote 5 more
good answers
Advances in AI

Ask your first

Singles Dating
question

Middle Ages (era) Fill out your profile

Birds Answer a question

Plants

Sexuality

Cunnilingus

Mystery Novels

Discover Spaces

About · Careers · Terms

· Privacy · Acceptable
Use · Businesses · Your
Ad Choices · Impressum
That is a log chart of the DJIA since inception in 1896. It has a stairstep shape, as
indicated by the arrows. There is a reason this stairstep exists. Once you know the
underlying reasons, it makes perfect sense.
Nearly everyone goes through 5 stages in their life. Kids, Young Adults, Build a Family,
Empty Nest, and Retiree. These stages are important because we change how we
spend and save in each stage. We shop at different stores, we drive different cars, we
choose different restaurants, etc. Most of our income occurs during the Build a Family
and Empty Nest stages.

The red arrow flats on the chart are when a generation is Building a Family. Heavy
consumer consumption, but little savings as families are spending as fast as they
make money. The stock market goes flat for about 17.5 years, with gains in the 2–
2.5% range over the entire duration. That was also true in the last one, from 2000 -
2018. Yes, there was a huge rally after the Financial crisis, but the fact is that from the
peak in 2000 to late 2018, the DJIA and the S&P only went up 2.5% a year end to end.

The transition to Empty nest stage for the kids of the Baby Boomers began in late
2018. I call the kids of the Baby Boomers “The Echo Boomers”. There are 84 million of
them, compared to 78 Million Baby Boomers. They already earn over 65% of the total
income in the US. This makes them the single largest financial Engine ever created on
planet Earth. Bigger than China.

As those Echo Boomers become Empty Nesters over the next 18 years, they will
spend money at a pace like we have never seen before. On top of that, they will be
inheriting $69 Trillion federally tax-free unless Democrats regain power, and tax the
hell out of it.

Let me Repeat. We will see the Largest Financial Engine EVER created on Planet Earth
unleash it’s power over the next 18 years.

During the periods represented by the green arrows on the graph, a generation is
going through the Empty Nest phase. The markets rise by about 16% per year over
that duration. It can make you very wealthy in under 20 years. During the Baby
Boomer Empty Nest years, the markets rose 16.7% annually. Since the Echo Boomers
are a larger group (7%), I am expecting the markets to rise in the 18% annual range,
but the inheritance factor could take that up a notch or two.

At 16.7% annually, you could reasonably expect $30,000 to grow to $500,000 over the
next 18 years by buying the S&P index. Not too shabby.

By making 2 changes from owning the S&P, I set up my 2 portfolios on 12/31/2018.

Here is how it is doing.

After 18 months, and a pandemic crash, I am tracking at a 32.95% annual pace vs.
22% for the S&P. Each account has 25 stocks, and started with $30,000 in each
account. I have 4 stocks that are in both accounts, so 46 stocks in total.
In the 46 positions, I have 9 losers (18%). I have 10 (21.7%) that have doubled or
more. My biggest winner is up more than all 9 losers combined loss.
The 4 stocks in both accounts are up 19.3%, 84.2%, 99.7%, and 195.8% and are about
25% of my total unrealized gains.

The 2 changes I made from the S&P 500 are that:

1) I eliminated 5 of the sectors and kept stocks from 6 sectors. Why? Because those 5
sectors
121are more5 oriented14 to the Build a Family Stage. The 6 I kept do well in the
 Empty Nest stage.
95
Home
2) I went through
Following
the 6 remaining
Answer Spaces
sectors and picked market
Notifications
leaders in 20 subsectors.
Search Quora Add Question
Think of it this way… when Building a Family we eat at Appleby’s or order pizza. When
we become Empty Nesters, we ditch Appleby’s and go to Outback or Ruth’s Chris
Steakhouse more often. Mama will be shopping at Chico’s more often, and not so
much at Macy’s or Walmart as she transitions into being an empty nester. Now do the
same with stock picks instead of buying an index and owning both, even though 84
million people are changing lifestyles.

Buy only All quality stocks. The reason I buy only quality stocks is very simple. Market
leaders got to be the market leader by having the right combination of Product R&D,
management, marketing, sales, distribution, patents, etc. Now they have volume. They
can spend more total dollars on marketing, yet spend less per unit for marketing. The
same is true for management, sales, R&D, etc. It’s ultra hard for a competitor to break
through, short of an idea with patent protection.

My goal in setting up these portfolios was to turn $30,000 into $2-$3 million in each
account over the next 18 years. That is why I track my portfolio’s vs those 2 numbers.
It is admittedly an outrageous goal. I just believe in setting the bar high and going to
work at making it happen. So, after 18 months including a global pandemic, you can
clearly see this works much better than buying an index.

The problem with buying an index is that you own all the winners, and all the losers.
The result is just average. That has never been a goal in my life.

So, in answer to your question… No, the next 18 years are going to be the most
fantastic ever in the markets.
39.6K views · View Upvoters · View Sharers · Answer requested by David Boehler

14 comments from Jack Miller and more

More from your Digest

Grammarly
Sponsored

Working to master your English skills?

Grammarly can help. Get rid of typos, grammatical mistakes, and misused words with
a single click!

Download

Albert

What is your question or link?

Answer · Recommended for you

Ross Ledehrman · Updated October 14
Former Quant, Investment & Risk Manager

What type of business would you never want to own?

A restaurant. 1. High fixed costs a. if you have a lease, and your restaurant does well,
your landlord can squeeze you like toothpaste. b. And what you going to do, aye?
Landlords just want money. And it is not like you can move overnight to a new…(more)

8.3K 54 102