Baby Zoomers, Invest Wisely
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The Best Investment: Yourself
Building Wealth Starts with Education and Skills
Marcus Padley | 17 June 2024 | Education Corner
Bored by yet another online University Lecture during COVID on Zoom, my son got off the computer in frustration and said, "If you're a Baby Boomer, Dad, then I'm a Baby Zoomer!"
Catching Up with the Boomers
I once ran beginner's courses in the stock market called “An Introduction to Finance and the Stock Market.” While most Marcus Today Members are mature investors with experience, I suddenly found myself in front of a younger audience—the Baby Zoomers—trying to play catch-up with the older, perhaps luckier, but certainly richer generation of Baby Boomers.
The Golden Era of the Boomers
It is irritating to them that seemingly less gifted people than themselves fluked forty golden years of extraordinary property and stock market appreciation. Golden years that, since the global financial crisis, are by no means guaranteed to repeat. The younger generation might never enjoy the 50-year golden period that has persisted since the start of the Debt Boom in 1974.
The Debt Boom: A Boomer's Advantage
The Boomer generation, like myself, without thinking, always took out a mortgage the moment they could afford to. The advice at the time from our parents’ generation was to get on the first rung of the property market as soon as possible. It was good advice.
The Changing Attitude Toward Debt
Of course, this was 1984, ten years into the credit boom, or more accurately, the “debt boom” that started somewhere in the early 1970s. The availability of debt has not been eternal. Before the days of loose credit, before the banks competed to lend money, they resisted lending money. To get a mortgage or a loan, you had to suck up to the banks, wear a suit to the interview, and promise them that your parents would repay every dollar if you didn’t. Only then would they begrudgingly slide some paperwork over the table with a stern warning that now they owned you, and woe betide you if you thought for an instant that this would not be repaid on time and in full.
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The Boomer's Windfall
In 1984, I was working for an investment bank in the UK, which, unprovoked by me or any other employees, suddenly offered us all flash company cars on a salary-sacrifice basis and three times our salaries in mortgage loans at a discounted interest rate with fast-tracked approval.
We all suddenly went from poor renters in the scruffy outer suburbs of London driving beaten-up Mark III Cortinas to property-owning yuppies driving new Golf GTIs and living in Chelsea. I have been living with debt ever since. And need I remind you that we didn't whinge when interest rates went from 9% to 17%, which they did. We just kept paying. After tax!
The Financial Benefits of Discipline
But it has paid off enormously. Since 1974, the property market, if you believe the numbers, has possibly returned 10% a year. A 10% return over 36 years, compounded, will turn $100,000 into around $4,525,925. If you had bought a house in Australia in 1974 for $100,000, then that equation is probably about right. The bloke that lives over the back of my fence did a bit better; he bought two blocks for £450 a bit earlier than 1974. Inflation has paid off that mortgage.
The Secret to Wealth: Timing and Responsibility
Of course, some Australians got on the property ladder a little bit later than 1974, and you can now generally guess the wealth of an Australian by their age, which dictates when they started to take responsibility for themselves and, as a consequence, bought a house. They are now sitting on a handsome asset, and while it may appear effortless to the new generations, there is a lesson for younger people from that success.
Property Ownership: The Real Driver of Success
The reason the Australian property buyer has made money stems not from the property market itself, although that has helped enormously, but from the enforced attitude to debt that comes with a large debt.
Property ownership forces property owners to be disciplined, to pay off capital, to control their spending, but most importantly, to get out of bed in the mornings with purpose. A mortgage, school fees, and not enough super (since super only started in 1991) are tremendous motivators. In fact, there is an argument, as evidenced by the miserable state of some of the very wealthy, that the more liabilities you have, including a mortgage, debt, family dependents, and, most obviously, kids, the more you get out of life because the more you are driven to succeed through effort.
The Dilemma Facing Baby Zoomers
Now translate this to a generation Zoomer that hasn’t fluked the property boom and doesn’t have enough capital to exploit the synchronous stock market boom, and you have a conundrum. Do they now borrow a million dollars and get their foot on the first rung of the property market, or do they embark on aggressive stock market speculation in order to even things up between themselves and the lucky generations that went before them?
The Best Investment for Baby Zoomers: Investing in Yourself
My suggestion is this: neither. Your best investment in your early 20s is not property or stock market speculation. Your best investment is in your brain, your career, and, if you are half smart, the business you build that into.
As any business owner will tell you, or as Robert Kiyosaki’s book "Rich Dad Poor Dad" will confirm, real capital is created by building assets—your own assets.
The Stock Market: Not the Best Option for Beginners
Plan on that, because there’s a little-known fact about the stock market you won’t get told.
The stock market is there to invest money you’ve made, not make money you haven’t got.
Go and make some money first; come back to the stock market later. There’s nothing for nothing here. 
