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By Scott Burns | 10-03-2012 01:00 PM

Sonders: Baby Boomers Not the End of the Line for Markets

A closer look at the echo boom and younger generations requires investors to take a more balanced view on the potential future effect of demographics on the markets, says Schwab's Liz Ann Sonders.

Scott Burns: Talking about the changing tides in America's generational investors.

Hi there, I'm Scott Burns. We're coming to you from Morningstar's ETF Invest Conference 2012. Joining me today is Liz Ann Sonders. She is the senior vice president and chief investment strategist with Charles Schwab.

Liz Ann, thanks for joining us today.

Liz Ann Sonders: Thanks for having me.

Burns: So, we were having a conversation here on the side about just people's perception around the baby boomers, and that the baby boomers, once they're retired and they're done, that that's kind of the end, that there is no more America. The baby boomers are the end of it all. Is that true?

Sonders: You know I don't think so. First of all, I'm a baby boomer. I am at the very backend of it.

Burns: You don't look it a bit.

Sonders: Well, thank you very much.

It is an odd discussion that we have, particularly as it relates to the market and the demographics of the baby boomers, and when were their peak spending years and peak investing years, and then the drawdown years. So a couple of things odd about it: One, this odd, almost assumption that, as you said, it's sort of the end of the line, and that there's no generation that follows that. But there's the entire echo boom generation, all the way from Gen X, Gen Y and then the Millennials. In fact the Millennials are a larger number than the baby boomers.

Burns: That's just a shocking statistic. I don't think in the general perception out there, I think everybody thinks there is the boomers and then that's it.

Sonders: No, we have the echo boomers coming behind them, and what's intriguing about that cohort--and you can move that into some degree Gen Y too--is that they tend to be bigger risk takers. They, in many cases, certainly the Millennials, were not hit by the back-to-back bubbles in financial crises from 2000 through 2008 or so. So they don't have that psyche that I think a lot of the boomers have of having lived through double bubbles, [which] really changed that generation's mindset about investing.

You didn't have that experience for a lot of the Millennials, and you look at statistics on the percentage that are entrepreneurs, the percentage that start companies, even silly things like the percent that get tattoos is maybe some measure of risk-taking.

You add those things up not to mention the fact that they're automatically investing at a younger age through programs like 401(k)s, where we didn't have that when I started working. And that starts them on the process toward investing at an earlier age. So I think you have to be balanced in a demographics analysis of what it means for things like the stock market.

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