Wednesday, April 24, 2013

The New Generation Gap

It used to be that older portfolio managers were always more bearish than younger managers.

For the first 20 years of my career, it was a well-accepted axiom that "Younger managers are more focused on the upside potential, while older managers are more focused on the downside."

But in recent years this has changed, in my opinion.

Younger investment professionals have not experienced a sustained bull market.  Since 1999, stocks have generally moved sideways.  Despite its recent run, the     S&P 500 is at the same level it was in 2000.  The stomach-churning market drops of 2001 and 2008 has taught investors under 40 years old to be wary of stock investing.

However, if you've been at this for as long as I have been, you well remember long periods of time when stocks did considerably better than nearly every other asset class.

While I think it is certainly possible that we will see a "correction" at some point in the next few weeks, I believe this will represent a buying opportunity.

Put another way:  by the time we reach 2023, I think that investors will look back at today's market levels as attractive.

However, if you have been working in the investment world for the past 13 years, stocks have rallied for a period, then collapsed.  Buy-and-hold seems to be a quaint concept from a by-gone generation.

It wasn't always thus.

In the 1990's, while many older investors growled about the overvaluation of stocks (in particular tech stocks), younger managers invested fearlessly in "hot" stocks, and were widely praised for their investment acumen.

I have posted a commercial from Ameritrade that was the rage in 1999.  Can you imagine such a commercial today?