Get your free Financial Independence Roadmap here.

Not the problems of our grandfathers

An analysis of how the investing landscape today has changed compared to how it looked 30 years ago, a time of high inflation and higher interest rates.

We aren't in the "olden days" any longer

Yesterday I was helping my son with his astronomy project. He needed to list the names of the planets, in order. Without thinking I flashed back some thirtyish years to recite the pneumonic I had been taught when around my son’s age:
“My Very Excellent Mother Just Served Us Nine Pies”
I smugly grinned at not needing to cheat by looking up Wikipedia. Inevitably he brought me back down to Earth with a matching grin of his own: Pluto wasn’t a planet anymore, so my silly old rhyme didn’t work. I was about to retort that it wasn’t too late to sell him on eBay, when he asked me what else had changed since I was his age doing the same astronomy project.
30 years ago we had time travelling Deloreans that could fly
30 years on, still no flying cars
I pointed to the iPad he was using. Steve Jobs hadn’t launched that yet. Jimmy Wales hadn’t started Wikipedia. Tim Berners-Lee hadn’t invented the internet yet either. Nokia had only just released their first mobile phone, and it cost the equivalent of £4,500 today. My son looked blankly at me, and asked who Nokia was. I sighed, pointing out that back then parents were still allowed to beat their children for being smartasses.
Nokia Cityman 1320
Nokia Cityman 1320 retailed for £1679 in 1986.
Later that evening I read Monevator’s excellent post about “The problem with low interest rates” discussing amongst other things: the prospects of negative real returns on bonds, the FTSE100 paying out more in dividends than they earned in profits, and the problems facing underfunded pension funds.

That got me to thinking about what else has changed over the last 30 years.

Compare 30 years ago to today

As I write this today:
30 years ago was around the time my grandfather retired. Back then he faced:
My grandfather had advised me to save all I could, and lock it away in term deposits with a range of expiration dates spread over a multitude of banks to hedge against one bank going broke.

He was looking forward to a comfortable retirement, living on a real return of around 7% forever.

Ten years later he was getting 4.44%.

Twenty years later 2.46%.

Today it would have been -0.01%.

So what?

As the saying goes “past performance is no guarantee of future results”. To put that another way, nothing lasts forever.
nothing lasts forever

0 comments :

Post a Comment

Disclaimer: I only link to products I use personally. I may receive a small commission for purchases made via links on this site.
Get your free Financial Independence Roadmap here.