Something To Dance About

I wrote recently about the increasing frustrations of Zoomers towards Boomers.

I titled that blog post "Boomer Backlash".

A big complaint is that younger Americans have been priced out of the house market due to rising prices.

They believe that Boomers got rich on houses they bought in the 1970's and 1980's which are now out of their reach financially.

I referenced this post on X as an example of the house envy of some Zoomers.

Link: https://x.com/MichaelAArouet/status/1992266496874357142

It is true that since 1975 a median price home has increased almost exactly 10-fold---from $41,200 to $411,000.

Source: https://fred.stlouisfed.org/series/MSPUS

It is a large increase over 50 years.

That is why many believe that buying a house is the best path to wealth.

However, the prices of houses have paled in comparison to the increase in stock market values.

Check out this chart from the Wall Street Journal that puts it all in context.

Source: The Wall Street Journal

Over the last 50 years the S&P 500 market index is up 75-fold!

Source: https://www.macrotrends.net/2324/sp-500-historical-chart-data

Stock prices have risen over seven times as much as house prices.

It makes sense to buy a home for the comfort of you and your family.

However, investing in stocks has been proven over the years to be the easiest method for most people to accumulate wealth.

The reality is that the Boomers cited above in the X post were most likely not celebrating the sale of the house they bought in 1991.

They probably had just checked their brokerage account statement and were celebrating that they bought the following stocks with a single $1,000 investment in each company over their lifetime.

In total, $5,000 invested over time that grew to almost $50,000,000.

1981  Home Depot                $22,510,000

1985  Nike                             $13,950,000

1995  Monster Beverage       $11,430,000

2005  Tesla                                 $346,000

2015. Nvidia                               $272,000

The example above also shows the power of compounding

All of these were great stocks to own.

However, as great as Tesla and Nvidia have been over the last 10 or 20 years, it is nothing compared to the compound power that comes from your money working for you for 30, 40 or 50 years.

With compounding working on your behalf, you do not even have to pick the best stocks. You just have to be invested in the stock market so it can work its magic.

For example, over the last 50 years, houses have appreciated at an average of 4.5% per year while the broad S&P 500 has averaged just about 12%.

What do you have today if $50,000 had been invested in 1975 a house vs. the S&P 500 at the same time?

House       $451,632

Stocks     $14,450,109

Forget the house.

Those Boomers are more likely to be dancing and celebrating their stocks.