ETFs as the Last of the Baby Boomers Hit 60

ETFs as the Last of the Baby Boomers Hit 60

Hey Boomers (and those planning their retirement), don't forget that ETFs are not quirky little index funds.

Reviewed by: Staff
Edited by: Ron Day

The fact that I turn 60 tomorrow didn’t hit me until a few weeks ago, when, at an early birthday celebration, I saw that number and my name written on the cake. 

Oh boy, I thought, it's getting real.

I cross that threshold in the caboose on the Baby Boomer train—the generation spanned the 18 years after World War II ended. In the U.S., 12,000 turn 65 every day this year, according to Census Bureau data reported by Yahoo Finance. 

In light of this, I'd like to emphasize some ideas and clear up misconceptions about ETFs in ways my colleagues at and I have been shouting through our words and podcasts.  

ETFs: Time to Align Perception with Reality

My primary concern is that the Baby Boomer generation still thinks of ETFs as quirky little index funds plugged into a small account to own “the whole market.” Nearly early every word of that statement is inaccurate or at least leaves a lot of meat on the proverbial bone.

As popular as this $11 trillion industry has become, I still see their greatest features and differentiators from other security types ignored. Referring back to that statement I made just above, ETFs are not simply “index funds.” If that were the case, the product innovators in this field could have stopped after making 34 of them, instead of 3,400 and counting.  

The Pieces to Solve Your Investing Puzzle

The real attraction to investors goes beyond planting money in the SPDR S&P 500 Trust (SPY). While no longer an advisor, I do comment on trends I see in investor behavior. There are constant messages out there regarding ETFs, but I fear a lot of it just gets swiped left…or right, whichever one of those means “not interested.”  

For investors with 30 or 40 years until they pivot from building wealth to sustaining and spending it, they can more afford to limit ETFs to a verb (“I just take my savings and SPY it”). But for my boomer peers, ETFs represent an elegant, robust set of “puzzle pieces” to build and manage portfolios, actively or passively.  

As Fonzie from Happy Days might have said, some boomers are “cruisin’ for a bruisin’.” And this is no time in our lives to put our market exposure totally on cruise control. So, here’s my tight summary of high points about ETFs that I want to document upon my 60th birthday. Because I’m so much of an ETF geek, this easily qualifies as a present to me…and hopefully for others.  

Retirement Destiny

ETFs are more than broad market index funds. In fact, the S&P 500 and Nasdaq 100 are so crowded at the top, they are not diversifiers like they used to be. That’s due in large part to SPY gaining 32% over the past three years, while the average stock among the top 1,000 gained only 4%. The Invesco Russell 1000 Equal Weight ETF (EQAL) tracks the latter measure.  

The range of possibilities with ETFs is nearly endless. Sectors, industries, and themes. Bitcoin, individual commodities, and ETFs go up when some slice of the market goes down. It is all within reach. 

There are ETFs that efficiently own T-bills and other types of bond investments, and leveraged ETFs that trade off more risk for less capital outlay. We even have ETFs that apply leverage or inverse techniques to owning high-profile stocks. I have tried every single one of those ETF “genres” in my own portfolio the past several years. 

From an investing and intellectual standpoint, it is liberating, and provides a sense of control over one’s retirement destiny.

It is all there for the taking. So, take it! Boomers simply need to spend some time learning more and personalizing their use of ETFs, rather than default to what “everyone else does.” Or find a pro, or explore the robust field of investment research, which expanded amid a surge in self-directed investing during the pandemic.

You Can Choose Your Own Path, But Do Choose 

I have always approached investing as more about understanding all the routes that can be taken, then choosing which ones I want to take. And I’d be very upset as an investment industry “lifer” that my Baby Boomer brethren had a chance to avoid having their wealth path become as cyclical as modern markets are, without ever having put in the effort to know what risks and rewards were a few clicks away.

So, whether you are 60 or within 20 years either side of that age range, there has never been a better time to go beyond the “same old same old” investment approaches. When markets fall hard, nearly all stocks go down. And we have learned in this new inflation era that bonds are not what they once were. ETFs help fill in the gaps, or they complete the puzzle all by themselves. Take it from one new member of the 60+ club: it is worth the effort.

Rob Isbitts was an investment advisor for 27 years before selling his practice to focus on ETF research and education. He is based in Weston, Florida. Contact him at  [email protected] and follow him on LinkedIn.