Investing evolves but some principles are evergreen, Charles Schwab reveals

Fifty years ago, many of today’s hottest investing preferences were the stuff of science fiction, but the fundamentals of investing were reassuringly similar.

To mark 50 years in the wealth management industry, Charles Schwab has been asking its clients, including some who have been with the firm since the early days, for their insights into investing.

It found that some core themes — persistence, diversification, early and regular investing, investing through different cycles, and sticking with a plan — are clear keys to success, for both old and new investors.

“I hear regularly from clients, many who started with us at the beginning — 40, even 50 years ago — and they tell me that, more than anything, discipline, patience and learning from the occasional mistake pay off and have brought them a financial freedom they could only have dreamed of,” said Schwab founder and co-chairman Charles Schwab. “Fifty years of experience shows us that diligent investors reap consistent rewards and really are the smart money.”

Among the advice shared by some of those who have been investing for the longest time:

• Have long-term viewpoints and stick to your plan, even when market selling seems relentless.
• Be realistic, patient, and avoid getting emotional.
• Diversify.
• Align investments with personal goals.
• Invest consistently.

“We know that staying in the market longer pays off but were eager to hear directly from clients about the lessons they’ve learned along the way and to understand differences for those who’ve been at it longer and those newer to investing,” said Jonathan Craig, managing director and head of Schwab Investor Services. “Seeing the wisdom in a principled approach from our most experienced investors made a ton of sense to us. But we were pleasantly surprised to see that kind of thinking also reflected in large portions of investors across the entire age and experience spectrum.”

SHARING KNOWLEDGE

Most respondents (59%) said they wish they had more knowledge when they first started investing, 48% said they’ve inspired someone to start investing, and 38% have taught someone else how to invest including 35% who have opened or helped open an investment account for someone else.

Almost two-thirds of respondents who have been investing since the 1980s said they are having more fun with their investments than they did when they first started, compared to 55% of the newest cohort.

Asked what they would do if they were given $100,000 to invest today, almost 9 in 10 investors from across the investing duration spectrum said they would limit risk and potential short-term gains to focus on slower but steady long-term growth.

And if they could only use one investment product for the rest of their lives, more than three-quarters would choose a broad market index fund.

GENERATIONAL DIFFERENCES

In addition to identifying some differences between new and more established investors, the survey also revealed some generational ones.

For example, asked whether they feel more comfortable working with a financial advisor now than when they began investing, 50% of millennials, 53% of Gen Xers, and 47% of boomers said they do.

And nearly half of millennials (45%) said they’ve given an investment recommendation, just 46% said they invested based on a tip, compared to 51% of Gen X and 52% of boomers. Only two in five (39%) millennials said they’ve lost money investing based on a tip.