Aging and Increased Investing Risk

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pkcrafter
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Aging and Increased Investing Risk

Post by pkcrafter »

Bobcat made a post a few days ago which contained several links. One I think is important and deserves it's own discussion deals with mild cognitive impairment from aging and increased investing risk.

Here's a link to the slides from the study:

http://cfpevents.mit.edu/wp-content/upl ... n-Howe.pdf

And a highlight that defines the problem:

*Decline in financial performance can be explained by age related decrease in financial knowledge

*Confidence in decision making does not decline

It's very clear that as financial performance gradually declines, an investor's confidence in decisions does not. Obviously, this can present a real problem. Part of the problem is cognitive impairment decreases at about 1%/year, so it sneaks up on us.

Link to the full study:

http://cfpevents.mit.edu/wp-content/upl ... teracy.pdf
The observed decline in financial decision-making quality may be related to gradual mild cognitive impairment that occurs in old age. Boyle et al. (2012) find that the rate of cognitive decline in a sample of older adults is a significant predictor of in correct responses to a financial decision-making test and increases susceptibility to financial scams.


From the conclusion:
A decline in financial skills may not lead to poor financial outcomes if (my emphasis) individuals recognize and anticipate the decline. For example, recognition of diminished investment skills may increase demand for annuitization or the delegation of important financial decisions to a trusted advisor. Studies of trading frequency provide some evidence that older investors are less overconfident than younger investors (Barber and Odean, 2001). In contrast, our study finds that, in aggregate and within all financial decision-making domains, advanced age increases over confidence in financial decision-making abilities.


One other problem with this subject is older investors are uncomfortable with the idea of losing control and they may resist even addressing or discussion it. For example, I asked a group of friends in their 70's if they would be interested in receiving links to the information I found, and not one showed any interest, and there were not even any comments or questions. I felt like I had brought up a taboo subject.

A few things that seniors might do is simplify and automate.

Here is the link provided by Bobcat:

http://cfp.scripts.mit.edu/home/archives/1421

Paul
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Re: Aging and Increased Investing Risk

Post by kolea »

Yeah, us seniors are close to being addle-brained and need a lot of care and supervision. :)

I can see why your question to your older friends fell on deaf ears. Probably about the same as us boomers telling the millennials and gen-x-ers how to manage their finances.

At some point you have to not look at the world as a risk to be managed and just let people be people.
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Jonathan
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Re: Aging and Increased Investing Risk

Post by Jonathan »

Stunning. I had no idea that the decline could start so early. All the more reason for an extremely simplified long-term strategy.

Per confidence not accurately reflecting performance: https://en.wikipedia.org/wiki/Illusory_superiority
Levett
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Re: Aging and Increased Investing Risk

Post by Levett »

Hi Paul,

It's very hard to get aging men, in particular, to consider all sorts of decline.

My wife and I are in our 70s and have taken many steps to address the issue.

There's considerable empirical evidence out there that many aging folks, regrettably, live in deep denial.

You experienced it with your friends. I see it with a number of acquaintances, as well.

Lev
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Re: Aging and Increased Investing Risk

Post by littlebird »

Yes. And I found, unfortunately, that Vanguard is poorly organized to automate in some situations. I wanted to have them automatically send my spouse's RMD to either our Vanguard MM Fund in our trust's name or to our trust bank account each year. But since he is a beneficiary of the trust and NOT a TRUSTEE, or in the case of the bank account, it's in our TRUST NAME and not his own, they wouldn't do it.

My spouse is already quite elderly and not able to handle these transactions. I am not immune to something similar happening to me. In fact, it's inevitable that SOMETHING will happen to me. My spouse's POA lists a successor attorney- in-fact who can step in if something does happen and I can't take his RMD out myself. But Vanguard's "Total Agent Power" does not allow for a successor to do this chore.

I wound up moving his IRA to the nearby b&m bank where they "know their client" (us) and do whatever they can to make things easy. Right now they're paying 2% on a 5-yr CD (and I kept his IRA in short-to intermediate bonds), so I'm not even losing much return, if any. But at this stage of our lives, flexibility and accommodation to our needs is more important to us than marginally greater return.

Interestingly, I was allowed to completely remove his entire IRA with my Agent Power, but couldn't move his RMD. !!??
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Re: Aging and Increased Investing Risk

Post by Bustoff »

littlebird wrote: But at this stage of our lives, flexibility and accommodation to our needs is more important to us than marginally greater return.
+1 Totally agree! Another good reason to reduce portfolio complexity.
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Re: Aging and Increased Investing Risk

Post by garlandwhizzer »

This is a potentially serious problem, losing competence but not confidence in our ability to make sound financial decisions as we age. There are multiple ways to approach this problem including finding a trusted advisor which in itself can be challenging, annuities which tend to be poor investments in terms of total return but provide a level of income certainty, and finally some Vanguard offerings including all in one funds like Life Strategy offerings, Managed Payout Fund, Balanced Index, etc.. Also Vanguard offers low cost portfolio advisors that can tailor an approach to an individuals needs and risk tolerance. I tend to trust Vanguard more than other financial firms for this due to their corporate structure (owned by investors, fewer conflicts of interest) and their reputation for honesty and reliability. Finally some notable advisors who post on this forum like Rick and Larry are in my opinion highly competent and have the required honesty and integrity that is sometimes lacking among financial firms and advisors. So there are a lot of good choices other than the annuities which BobK likes. The trick is to pick the right one for your own situation and do it before you lose your marbles.

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Re: Aging and Increased Investing Risk

Post by pkcrafter »

One more thing to add to this --

Are you a SEC Accredited Investor? Some here qualify, but I wonder if they are aware of it.

What is it?

See item 6 and 7 here:

http://edgar.sec.gov/answers/accred.htm

And what does this entitle you to?

You may be offered unregistered, high risk investment options.
Certain securities offerings that are exempt from registration may only be offered to, or purchased by, persons who are accredited investors. One principal purpose of the accredited investor concept is to identify persons who can bear the economic risk of investing in these unregistered securities.

Unlike offerings registered with the SEC in which certain information is required to be disclosed, companies and private funds, such as a hedge fund or venture capital fund, engaging in these exempt offerings do not have to make prescribed disclosures to accredited investors. These offerings, sometimes referred to as private placements, involve unique risks and you should be aware that you could lose your entire investment.
http://www.investor.gov/news-alerts/inv ... -investors

This seems to me to be a bad mix of older investors and inappropriate investments.


Paul
Last edited by pkcrafter on Thu Sep 24, 2015 8:16 pm, edited 1 time in total.
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Re: Aging and Increased Investing Risk

Post by Rodc »

A few things that seniors might do is simplify and automate.
I think those are good ideas. With any luck you simplify early and understand that complicated in general is to be avoided at any age. What constitutes "complicated" varies with the individual, but something to keep in mind.

I am already not as smart as I once was. I'd like to think it is because my life has become so complicated - work is full of rapid fire multi-tasking, gone are the days early in my career where I might focus on one math problem for months. I have kids to keep track of (soon they will drive and I won't have to keep track of where I need to get them - scouts in 15 minutes!). Wife's scheduled. Two or three volunteer jobs (one doing town capital planning and financing). I hope when I retire in a few years and kids are out of the house life will be less hectic and all of a sudden I'll be smarter again.

But probably not. For one thing I simply cannot focus hard for hours on end like I used to be able to do. I noticed this in my mother, who died last year at age 89. In many ways still very sharp. but the energy to focus on something was just so low. That said she was still reading books on physics, reading Bogleheads and books on asset allocation and the intricacies of bonds. But invested in Vanguard all in one balanced funds. :)

So this is something we all need to face and to remember, we don't live in Lake Wobegone.

Thanks for posting.
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Re: Aging and Increased Investing Risk

Post by afan »

Great reason to stick with a 2-4 fund portfolio, no leverage, and by sticking with sources like Vanguard funds, no one to sell you unregistered securities.
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Re: Aging and Increased Investing Risk

Post by Fallible »

More good reasons to keep wise investing just what it basically is: simple.
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Re: Aging and Increased Investing Risk

Post by David Jay »

The linked article notwithstanding, I'm going to keep listening to Taylor Larimore...

:happy
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Re: Aging and Increased Investing Risk

Post by ShiftF5 »

Levett wrote:Hi Paul,

It's very hard to get aging men, in particular, to consider all sorts of decline.

My wife and I are in our 70s and have taken many steps to address the issue.

There's considerable empirical evidence out there that many aging folks, regrettably, live in deep denial.

You experienced it with your friends. I see it with a number of acquaintances, as well.

Lev
Years ago I encouraged my then 65 year old retired dad to go check out the local senior center.

He refused to go spend any time with a bunch of "old people" (his words).

Denial? Call it what you will.
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Re: Aging and Increased Investing Risk

Post by abuss368 »

Bogleheads,

Jack Bogle has often said "simplicity is the master key to financial success"!

This is important during our investing lifetimes and more so as we age.

Best.
John C. Bogle: “Simplicity is the master key to financial success."
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Re: Aging and Increased Investing Risk

Post by pkcrafter »

David Jay wrote:The linked article notwithstanding, I'm going to keep listening to Taylor Larimore...

:happy
Just can't get better than that.


Paul
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Re: Aging and Increased Investing Risk

Post by snowshoes »

pkcrafter wrote:
David Jay wrote:The linked article notwithstanding, I'm going to keep listening to Taylor Larimore...
:happy
Just can't get better than that.
Paul
+1 :happy
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Re: Aging and Increased Investing Risk

Post by Leeraar »

I think that credit should be given here:

http://crr.bc.edu/wp-content/uploads/20 ... -1-508.pdf

L.
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Re: Aging and Increased Investing Risk

Post by Miriam2 »

Leeraar had an interesting thread on this in January 2015, "How Does Aging Affect Financial Decision Making"
www.bogleheads.org/forum/viewtopic.php?f=10&t=156121
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Re: Aging and Increased Investing Risk

Post by john94549 »

As far as trading goes, I was an idiot long before I became a candidate for dementia.

You can be really stupid and still make money trading stocks.
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Re: Aging and Increased Investing Risk

Post by The Wizard »

ShiftF5 wrote:
Years ago I encouraged my then 65 year old retired dad to go check out the local senior center.

He refused to go spend any time with a bunch of "old people" (his words).

Denial? Call it what you will.
Indeed.
I'm 65 presently and sometimes traffic on a local road will be slow for no apparent reason, to which I will explain to my passenger: It's probably OPD up ahead. (Old People Driving...)
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Re: Aging and Increased Investing Risk

Post by livesoft »

I wonder if there is a correlation between when people went through their "formative years" and some of this. For instance, mutual funds did not become that popular until the 1980s with Peter Lynch and Fidelity Magellan in the news all the time. That was 35 years ago, so just in time for a then 20-year-old to learn about mutual funds.

But for a current 80-year-old, the 1950's were their formative years. Investing back then was life insurance, stock brokers, high commissions, pensions, etc.
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Re: Aging and Increased Investing Risk

Post by jimkinny »

livesoft wrote:I wonder if there is a correlation between when people went through their "formative years" and some of this. For instance, mutual funds did not become that popular until the 1980s with Peter Lynch and Fidelity Magellan in the news all the time. That was 35 years ago, so just in time for a then 20-year-old to learn about mutual funds.

But for a current 80-year-old, the 1950's were their formative years. Investing back then was life insurance, stock brokers, high commissions, pensions, etc.
This is not a bad point and it needs to be ruled out. I did not read the full study. But.....seems that cognitive decline is well established and there would be no reason that financial skills would be exempt but if one has a higher base level of knowledge, the decline might not leave one as vulnerable.
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Re: Aging and Increased Investing Risk

Post by Call_Me_Op »

Interesting article. I am in my 50's, so I guess still near the peak. While I believe in custodial diversification, down the road consolidation (within limits) would seem like a good idea. I only wish I liked Vanguard's website more, because it's really the only mutual fund company I trust (not to try to take advantage of me when I am older).
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Re: Aging and Increased Investing Risk

Post by Toons »

I just take it one day at a time.
Do my best to keep the mind sharp via exercise,puzzles,working with numbers.
Those things that are under my control. :happy
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Re: Aging and Increased Investing Risk

Post by tennisplyr »

Well I'm 65 and still fairly swift. Am very active, computer literate, educated, fit, dress well and surround myself with all ages. No plans on turning the reins over any time soon.
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Re: Aging and Increased Investing Risk

Post by john94549 »

I should also note it's only a "risk" if you fiddle around with your investments. Years ago, I established a dedicated "fun money" trading account at Schwab. I knew, as I grew older, I would do ever more dumb stuff. So I limit my "dumb stuff" to my trading account. Ironically enough, my dumb trades have done pretty well. Certainly better than my Vanguard account this year.

That said, it was a bit scary when I forgot the PIN number for my ATM. The teller at Wells Fargo was too kind. He helped me set a new PIN in under five minutes.
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Re: Aging and Increased Investing Risk

Post by GoldenFinch »

john94549 wrote:As far as trading goes, I was an idiot long before I became a candidate for dementia.

You can be really stupid and still make money trading stocks.

Of course we all know that the opposite is also true; you can be really smart and lose money trading stocks.

Better to simplifiy, automate, not market time and continue to follow the plan. Which is what we (mostly) all do here.
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Re: Aging and Increased Investing Risk

Post by finite_difference »

I'd like to see a citation for the 1% decline/yr. So someone at someone at 60 has 66% of their cognitive abilities compared to 20? I would think it would be quite a bit more complicated than that -- for example, may not think as fast but may think more thoroughly.

I agree with automating as much as possible. And following a simple plan such as the 3 fund portfolio. Although with "age in bonds" means you would need to use a product that automatically changes it for you.
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Re: Aging and Increased Investing Risk

Post by john94549 »

GoldenFinch wrote:
john94549 wrote:As far as trading goes, I was an idiot long before I became a candidate for dementia.

You can be really stupid and still make money trading stocks.

Of course we all know that the opposite is also true; you can be really smart and lose money trading stocks.
Which, of course, was my point.
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Re: Aging and Increased Investing Risk

Post by magneto »

There is a lot of common-sense in simplifying the portfolio as we age.

However this investor at age 72, has 21 entries for stock funds and 5 entries for bonds, on our portfolio spreadsheet.
Perhaps in the minority, feel rewarded over the years by those multiple holdings, which provided opportunities for rebalancing, and thus remain reluctant to prune holdings.
Maybe at the next annual review of IPS should reconsider this attitude?

Perhaps the best advice for us oldies is to make sure there is an up to date IPS in place, and re-read it before making any unusual or difficult decisions. Never to act hastily.

Take care
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Re: Aging and Increased Investing Risk

Post by goingup »

john94549 wrote:I should also note it's only a "risk" if you fiddle around with your investments. Years ago, I established a dedicated "fun money" trading account at Schwab. I knew, as I grew older, I would do ever more dumb stuff. So I limit my "dumb stuff" to my trading account. Ironically enough, my dumb trades have done pretty well. Certainly better than my Vanguard account this year.

That said, it was a bit scary when I forgot the PIN number for my ATM. The teller at Wells Fargo was too kind. He helped me set a new PIN in under five minutes.
Sure that's fine until you forget which account you're allowed to do "dumb stuff" in! :oops:
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Re: Aging and Increased Investing Risk

Post by denovo »

Am I just stating the obvious, but assuming you A. Trust Your Children and B. Passed along the Boglehead Principles, wouldn't it be natural to give one of them a power of attorney to handle your investments for you if you can't handle them anymore?
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Re: Aging and Increased Investing Risk

Post by denovo »

livesoft wrote:
But for a current 80-year-old, the 1950's were their formative years. Investing back then was life insurance, stock brokers, high commissions, pensions, etc.

I think most people in that era relied on bank savings, pensions, and social security. I don't think stock investment (directly) or life insurance as investment was common.
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Re: Aging and Increased Investing Risk

Post by Leeraar »

GoldenFinch wrote:Of course we all know that the opposite is also true; you can be really smart and lose money trading stocks.
There is an urban legend about how bad the returns of the Mensa Investing Club were.

L. :P
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Re: Aging and Increased Investing Risk

Post by The Wizard »

denovo wrote:Am I just stating the obvious, but assuming you A. Trust Your Children and B. Passed along the Boglehead Principles, wouldn't it be natural to give one of them a power of attorney to handle your investments for you if you can't handle them anymore?
It seems reasonable discussing it at arm's length like this, yes.
Problem is, when the time comes "you" won't recognize that it's time. That is the insidious nature of this thing...
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Re: Aging and Increased Investing Risk

Post by Pizzasteve510 »

It seems to me that there is an important distinction between investing and trading, and then in active investing vs passive investing.

I agree with the basic assumption, but only with respect to active investing. It is probably especially true in the areas of technology and industries undergoing transformation.

When I was very young my thoughts on where to invest were particularly insightful. While it may not apply today, I was using computers and understanding future winners quite reasonably well when 16-22 yrs old. I actually wrote my graduation thesis on how Oracle and IBM would dominate the database market in 20 yrs in 1985. The economics seemed obvious to me at the time, I did good research, and had access to a university with the best resources and advisors. At that time relational databases were relatively new, but as a young student at a top school I was informed. I predicted what I called the emerging information utility based on using the internet to serve up information from huge databases, which would be hugely profitable due to the exponentially declining marginal cost of storage and processing, shortly after graduation (think Google).

Today I still think I know something, but I feel I am barely keeping up, not ahead of the curve. The kids I interview for admissions to my former undergrad program are brilliant and say things that astonish me about where they think the future is going. If I could, I would invest in the areas they are showing me will emerge.

My opinion is that the young could have insights and an advantage in seeing innovation that will pay off, and if capitalized could produce better results. That said, when young I had little capital to bet on my own insights and further less confidence to put all my eggs in a speculative basket. I bought VG Star fund when it was founded instead.
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Re: Aging and Increased Investing Risk

Post by Leeraar »

The Wizard wrote:
denovo wrote:Am I just stating the obvious, but assuming you A. Trust Your Children and B. Passed along the Boglehead Principles, wouldn't it be natural to give one of them a power of attorney to handle your investments for you if you can't handle them anymore?
It seems reasonable discussing it at arm's length like this, yes.
Problem is, when the time comes "you" won't recognize that it's time. That is the insidious nature of this thing...
I think I put this in the previous thread:

My Power of Attorney documents naming my sons and stepson are all signed and in a 3-ring binder on the bookshelf (with copies at the lawyer's office). I don't have to recognize when I get stupid. They do.

L.
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Re: Aging and Increased Investing Risk

Post by denovo »

The Wizard wrote:
denovo wrote:Am I just stating the obvious, but assuming you A. Trust Your Children and B. Passed along the Boglehead Principles, wouldn't it be natural to give one of them a power of attorney to handle your investments for you if you can't handle them anymore?
It seems reasonable discussing it at arm's length like this, yes.
Problem is, when the time comes "you" won't recognize that it's time. That is the insidious nature of this thing...
You can designate people in advance, assuming you trust them, one of my assumptions. Even if you haven't reached that stage where you feel your competency is at risk, you can have your children start assisting you with financial decisions, two sets of eyes are better than one, and it allows them to ramp up responsibility instead of being hit with a ton of responsibilities at once.


My parents are getting up in their age, but are still competent, but unfortunately not technologically literate, so I do their taxes, insurance shopping, and set up all their auto bill pay stuff.
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Re: Aging and Increased Investing Risk

Post by ruralavalon »

All utility and insurance bills are set up for automatic bill pay.

We are both 70 years of age. Our current portfolio is fairly simple, it includes just five Vanguard mutual funds.

Durable Powers of Attorney were signed long ago, and copies given to our children.
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Re: Aging and Increased Investing Risk

Post by pkcrafter »

Let's not forget this part:
The likelihood of being overconfident with one’s financial knowledge increases with age
I told a 74 yo friend that after 60 we begin to lose about 1% a year in financial managing ability, and he said that's not bad, we have 100 years! :happy

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Re: Aging and Increased Investing Risk

Post by littlebird »

denovo wrote:
livesoft wrote:
But for a current 80-year-old, the 1950's were their formative years. Investing back then was life insurance, stock brokers, high commissions, pensions, etc.

I think most people in that era relied on bank savings, pensions, and social security. I don't think stock investment (directly) or life insurance as investment was common.
My working class parents had individual stocks (I remember them owning AT&T, and a telephone company that eventually became Sprint. Rochester Telephone?) in the 50's. In fact so did my working class maternal grandparents who (because they were in a second marriage) even had an irrevocable trust. Both couples had whole life policies. None had pensions.
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Re: Aging and Increased Investing Risk

Post by Christine_NM »

Ah, a thread I can relate to. It only took me 2 days to find. :happy

It may not be all age -- many of us in our 60's and 70's (Medicare age) are now taking potent medications. We didn't have to worry about side effects when younger. Drug up those young folks and see how their investments perform!

Seriously, memory loss is more of an issue this year (72) and sometimes I just don't want to think things through. I stopped taking a suspect pill last week and feel a bit clearer-headed. I will have to lower the dose I think.
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Re: Aging and Increased Investing Risk

Post by ourbrooks »

Now, you've got me really worried. I thought I know what assets and liabilities were, but according to Appendix 1-A, p. 39, from the study, the correct answer is the one in italics.

1. Net worth is equal to:
1. Total assets
2. Total assets plus liabilities
3. Total assets minus liabilities

Had I know this, I would have borrowed a lot more money to increase my net worth.

Furthermore, per this study, p. 41, John Bogle is clearly senile:

Question 6.
It is best to avoid owning stocks of foreign companies.
1. True
5. False
Fallible
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Re: Aging and Increased Investing Risk

Post by Fallible »

goingup wrote:
john94549 wrote:I should also note it's only a "risk" if you fiddle around with your investments. Years ago, I established a dedicated "fun money" trading account at Schwab. I knew, as I grew older, I would do ever more dumb stuff. So I limit my "dumb stuff" to my trading account. Ironically enough, my dumb trades have done pretty well. Certainly better than my Vanguard account this year.

That said, it was a bit scary when I forgot the PIN number for my ATM. The teller at Wells Fargo was too kind. He helped me set a new PIN in under five minutes.
Sure that's fine until you forget which account you're allowed to do "dumb stuff" in! :oops:
And unfortunately, this is an example of the reality of it - forgetting which account you set up to use when you become forgetful. Yet it's an understandable mistake. Preparing for cognitive decline includes knowing the signs that decline has advanced far enough to require outside help from family, friends, or professional services. Ideally, it means knowing this before the decline has advanced too far, and that can be extremely difficult.
"Yes, investing is simple. But it is not easy, for it requires discipline, patience, steadfastness, and that most uncommon of all gifts, common sense." ~Jack Bogle
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goingup
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Re: Aging and Increased Investing Risk

Post by goingup »

I recognize that cognitive decline may become a factor in the not-so-distant future. But right now, as a mid-50's investor, I would take the bet that my 70 year old self will be a far, far, far better investor than my 20, 30 or 40 year old self ever was. (Uh-oh...is that the overconfidence problem they refer to?!) :oops:
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Re: Aging and Increased Investing Risk

Post by The Wizard »

goingup wrote:I recognize that cognitive decline may become a factor in the not-so-distant future. But right now, as a mid-50's investor, I would take the bet that my 70 year old self will be a far, far, far better investor than my 20, 30 or 40 year old self ever was. (Uh-oh...is that the overconfidence problem they refer to?!) :oops:
It is indeed, similar to my driving ability, which has been improving slightly each year for as long as I can recall...
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Re: Aging and Increased Investing Risk

Post by Call_Me_Op »

The Wizard wrote: It is indeed, similar to my driving ability, which has been improving slightly each year for as long as I can recall...
Just don't claim to be the best driver in the country, as I hold that distinction.
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goingup
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Re: Aging and Increased Investing Risk

Post by goingup »

Call_Me_Op wrote:
The Wizard wrote: It is indeed, similar to my driving ability, which has been improving slightly each year for as long as I can recall...
Just don't claim to be the best driver in the country, as I hold that distinction.
Hilarious!! :sharebeer
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Re: Aging and Increased Investing Risk

Post by Browser »

I posted on this topic previously:

viewtopic.php?f=10&t=171381
Our evidence indicates that older and more experienced investors hold less risky portfolios,
exhibit stronger preference for diversification, trade less frequently, exhibit greater propensity for
year-end tax-loss selling, and exhibit weaker behavioral biases such as the disposition effect and
familiarity bias. Thus, their choices reflect greater knowledge about investing. But consistent
with the cognitive aging hypothesis, we also find that older investors have worse investment
skill, where the skill deteriorates sharply around the age of 70.[my emphasis] Examining the economic costs
of aging, we find that older investors earn about 3-5% lower annual return on a risk-adjusted
basis. Collectively, our evidence indicates that older investors’ portfolio choices reflect greater
knowledge about investing but their investment skill deteriorates with age due to the adverse
effects of cognitive aging.

These results could potentially be used to improve the investment decisions of older investors.
We do not prescribe that older investors should stop making independent investment decisions.
Rather, based on the evidence, our hope is that older people would recognize the adverse effects
of cognitive aging and would try to compensate for those effects, perhaps by seeking advice
from a financial advisor or some other qualified investment professional.
http://finpko.faculty.ku.edu/myssi/FIN9 ... T_2010.pdf
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Re: Aging and Increased Investing Risk

Post by carolinaman »

by pkcrafter » Thu Sep 24, 2015 12:25 pm

"Bobcat made a post a few days ago which contained several links. One I think is important and deserves it's own discussion deals with mild cognitive impairment from aging and increased investing risk.

Here's a link to the slides from the study:

http://cfpevents.mit.edu/wp-content/upl ... n-Howe.pdf

And a highlight that defines the problem:

*Decline in financial performance can be explained by age related decrease in financial knowledge

*Confidence in decision making does not decline

It's very clear that as financial performance gradually declines, an investor's confidence in decisions does not. Obviously, this can present a real problem. Part of the problem is cognitive impairment decreases at about 1%/year, so it sneaks up on us."

This is a very interesting and sobering study. It sounds like aging seniors will be the last to know of their cognitive decline, at least in many cases.

How can we mitigate that risk? Portfolio simplification, annuities and using a trusted advisor (is that an oxymoron?) are options. Another option might be to have a trusted family member monitor your investment activities, making sure you do not do anything wild and crazy. I have not checked with Vanguard or Fidelity, but could I designate someone to be notified by email of my account activity?
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