You Might Have Really a Long Time Horizon to Invest

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The Atlantic published an interesting graphic recently on how the average life expectancy has changed from 1880 to today.

age

In 1880, the average life expectancy was 39.4! Fast forward to a baby born in 2012 and their average life expectancy nearly doubles to just shy of 80 years.

Each of the dots on the graph represents a medical breakthrough which has increased the average life expectancy. Penicillin was discovered in 1928. They also cover the Polio vaccine along with the establishment of the CDC and FDA (click on the sourced link at the bottom of the page and play around with this graphic for more).

The investment implications from this graph are huge. In the past, most people didn’t live long enough to retire. They mostly worked until they died.

People from past generations didn’t have to worry nearly as much about saving or skyrocketing health care, and living costs in retirement because there wasn’t reason to plan for it.

As technologies continue to develop at an exponential rate I would imagine we will continue to live longer lives as healthcare improves.

This means long term financial planning is now more important than ever. The choices are either save more and prepare for the future or plan on working much longer to support your current lifestyle.

The funny thing is that as a society we are now more focused on the short term more than ever when the long term will continue to be much more important.

Famous investor and economist John Maynard Keynes once famously put the long term into perspective:

The spectacle of modern investment markets has sometimes moved me towards the conclusion that to make the purchase of an investment permanent and indissoluble, like marriage…might be a useful remedy of our contemporary evils. For this would force the investor to direct his mind to the long-term prospects.

As we continue to see advances in modern medicine our time horizon becomes more and more important as it grows longer and longer.

Source:
Why we live 40 years longer today than we did in 1880 (Atlantic)

 

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  1. Martin commented on Nov 19

    On the other hand, if you are not focused on the short term, next earning result season hunt and really focus on long term, then time will become your best friend. Knowing that, your results will be enormous.

    • Ben commented on Nov 20

      Right, in the short term you can find things that are out of whack and then you focus on the long term. Here’s Buffett from an interview yesterday:

      “We look at owning stocks as owning parts of business, just like owning a farm or an apartment house,” he said. “And if you buy the right farm or apartment house or the right business through a stock, and you don’t try and guess whether it’s going to go up next week or next month, but you hold it for five or 10 or 20 years, you’re going to do very well.”

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