Yes, the fountain of youth really does exist, and academic research is increasingly proving it to be found amidst your investment portfolio. A growing body of scholarly research shows that, in many ways, life can get better as we get older and being an active investor can contribute in significant ways.
As I write this, I’m 62 years young, and without a doubt, I’m a far more profitable trader today than I was 10 years ago. I expect to be even more skilled in another 10 years as my expertise deepens. It’s as if the “intuition gap” that separates me from the market continues to narrow. I’ve worked all my life to make that gap smaller and smaller. I chose to believe that is why they refer to them as the ‘golden years’. Without getting too metaphorical, it’s like the distance between me and the market has become a relatively narrow space such that I can nearly reach across the chasm and touch the other side.
Before you dismiss this stay-young-by-investing thesis, consider the investment track records of some mature money managers such as Warren Buffett, John Templeton, George Soros, Shelby Davis and Philip Carret who all practiced their craft for at a minimum of 38 years. Some are still going strong beyond 55 years.
Here is some of what the academic community tells us:
- Expectations versus reality about getting older are way off! When polled, individuals aged 18 – 64 revealed the following about being older than 65:
a. 57% believe they will experience memory loss after 64, when in reality only 25% actually will.
b. 42% expect to have a serious illness when in reality only 21% will.
c. 29% believe they will feel unneeded when in reality only 9% will.
The point being this – don’t allow false expectations to stand in the way of your investing efforts.
- Research busts other myths. If you stay mentally and emotionally engaged – and managing your portfolio qualifies – then the academics tell us our emotional well-being improves into our 70s when it levels off. Yes, the peak of emotional life may not occur until well into our seventh decade. My only personal caveat here is that I no longer trade the short side of the market. Historically, the stock market has rewarded optimists far more than pessimists, and I simply choose to trade with the bulls versus sleep with the bears. Emotionally, that works better for me.
- Myth: Cognitive decline is inevitable. Research has shown that when you remove the variable of testing in a lab and instead test in more comfortable and familiar settings, the younger participants typically recruited by professors lose their advantage. In a comfortable testing environment, the older participants experience and knowledge shine brightly and prove their mental skills increase with age. Believe it and keep investing!
- Okay, this is tough for me. I’ve always believed that a sound body contributes to a sound mind, and in my own anecdotal observations of traders, this has generally been reinforced. Where the academics tell me I need to revise my mantra is with respect to intensity. The old cliché about “all things in moderation” turns out to be clinically based. A number of longevity studies have shown that if you don’t exercise, you die younger, and that’s not good for your portfolio. No surprise there. What is surprising is that joggers (or moderate intensity exercisers) significantly outlive serious runners (or high intensity exercisers). They call it the “overuse injury”. It’s as if too high an intensity causes burnout and diminished longevity. I’m sure we all know folks that tend towards this high intense end of the spectrum. I’ve known traders that fit this bill and burned out young. So, back to the “all things in moderation” mantra – I suggest you apply it to your investing as well and keep on truckin’!
- This is for all you young bucks who think you are so much more productive than us older folks. Mercedes Benz did a research study where they examined the number and severity of the errors made by 3,800 assembly line workers. They found that the older workers committed fewer severe costly errors. Clearly, these older workers had years of experience that their younger co-workers did not, and their experience level served to deepen their knowledge and intuition, letting them avoid more severe and costly mistakes. Given that, who would you want to manage your portfolio? Good answer... yourself.
- Myth-buster: Creativity has long been seen as the arena of the young. Think Jobs and Wozniak, Lennon and McCartney. Recent studies show that creativity peaks in one’s 20s for fields such as pure mathematics and theoretical physics. However, in fields that require accumulated knowledge – and investing in the stock market certainly qualifies here – creative peaks typically occur much later in life. Folks who relied on their accumulated wisdom and did their greatest work in the 50s and 60s should be the motivational team for us mature investors. Pick your own creative hero from geniuses such as Mark Twain, Frank Lloyd Wright, Virginia Woolf, Robert Frost, Paul Cezanne, and more.
In summary, these academic studies should convince you that you have a lot of fuel left in the tank and actively managing your own investments will not just be financially rewarding but will provide the catalyst for a longer and more meaningful life. The market is willing to reward you for your experience and your intuition. Take it!
If you are able to remain engaged physically and intellectually, then you must believe that and act accordingly. Don’t fall pray to stupid myths on aging.
By choosing to remain engaged, your circle of friends who share your passion for the markets will expand, your brain’s gray cells will be happier for it, and your beneficiaries will have to succeed in the real world on their own because you plan to live a long time before they ever see their inheritance!
Trade well; trade with discipline!
-- Gatis Roze
Acknowledgement: I’d like to thank Anne Fergesen of the Wall Street Journal for providing the catalyst for this week’s blog.