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The implication that retirement implies less risky investment isn’t true for the truly rich, who control most of the wealth in truly risky asset classes (VC, et
by gen220 4y ago
The implication that retirement implies less risky investment isn’t true for the truly rich, who control most of the wealth in truly risky asset classes (VC, etc).
For example, consider a 60 year old retiree with a 529 plan. Their daughter got into an expensive college but received a merit scholarship, so they only need to use 1/2 of the plan’s balance. The 529 is inheritable by the beneficiary, who will have children going to college in 25 years. The time horizon of the investments in this portfolio just went from near-term/conservative to long-term/risky.
Similarly, there are many boomers who have more money saved up than they could reasonably hope to spend in retirement. They are no longer investing for their future selves, but for their children or grandchildren, who have long time horizons.
Also, most of the LPs in big venture funds are institutional capital (endowments, family offices, etc), not personal capital.
The argument that appetite for more risky investments will dry up (say, decline by 50%) is flawed if it hinges primarily on demographics and interest rates, IMO. These asset classes are far removed from the retirement strategies of everyday people.
- FunnyBadger 4y agoMost Boomers are anything but wealthy - and the few that are are only wealthy on paper. OP is correct on this.
- gen220 4y agoRight, but the median Boomer is not invested even indirectly in risky asset classes that influence early stage company funding, which is why the predicate (median retirees diversifying into more conservative investments) does not imply the conclusion.
- commandlinefan 4y ago> got into an expensive college but received a merit scholarship I know you're just throwing out an example and I'm going off on a tangent, but as somebody who just went through the college admissions process, this scenario is about as realistic as the retiree's daughter visiting an alien civilization on her flying unicorn. Merit scholarships for expensive (i.e. "prestigious") colleges barely exist - you might get $1000 (of the $70K annual tuition).
- gen220 4y agoOne of my close friends got a merit scholarship that covered 50% of her tuition at a top-2 school for her undergrad concentration. Another got 50% merit, 50% student loans, and qualified for a Pell grant. But this was almost 10 years ago, no idea if the norms have changed. But these were people in maybe the top decile of their top 1000 high schools. If you factor that in as a prior (which wouldn’t be uncommon for a well to do family), I think the odds of a good merit scholarship improve.