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Opinion: GOATs and Asset Allocation

by Apoorv Trivedi on
Opinion

Opinion: GOATs and Asset Allocation

In the 90’s, I remember tennis players were thought to peak in their mid-20s and many retired by the time they turned 30. Stefan Edberg, Pete Sampras, Steffi Graff – all retired at or around 30.

All that changed with the arrival of the 4 GOATs (Federer, Nadal, Djokovic and Serena) in early 2000s, each playing at or close to the top of their games well into their mid-late 30s. And lets not forget King James (37) and Tom Brady (45!).

Assuming a typical sports career starts at 18, the difference between retiring at 30 vs. 36, is the same as a someone in your traditional 9-5 retiring at 80 instead of 60 – a 50% longer career.

We haven’t yet explored the limits of how long human beings are capable of being at the top of their game, active and productive. The best sportspeople may be showing us what is in store for the rest of us. If their body can remain in peak condition for 50% longer, who’s to say the same will not be true of our bodies and minds.

But isn’t this already happening? After all my own parents were practicing medicine into their 80s till COVID put them into house arrest. After a few hiccups recently, they plan to resume soon.

Increasing life expectancy isn’t new but Warren Buffet (92) and Charlie Munger (98) being at the top of their game is still unusual. I suspect in 30 years that will no longer be the case. 90 will be the new 60.

Why so optimistic?

By one measure tennis became big business in mid-80s – the Wimbledon winner’s purse went from 2x Britain’s per capital GDP in 1980 to 12x in 1984 (55x in 2019!). It took 20 years for sports medicine / science / psychology to then advance the working life of superstars by 50%.

In 1980, there were 20 million people over 80 in the world (0.5% of population). That number is 147 million today (1.5%) and WHO expects it to cross 420 million in 2050 (5%).

20 million on their death bed and spread all over a world without internet isn’t much of a market. Half a billion of the world’s richest sitting a click away is a different ball game.

And a lot of the work that’s already been done getting Tom Brady to sprint like a spring chicken at 45 is going to trickle down to the rest of us in next 10-20 years.

What is all this talk doing on a personal finance website?

Many PhDs have been granted for studying the impact of an ageing society on government finances and social security. Much breast-beating has taken place lamenting the geriatrics ruling over young populations from US to Iran.

Anecdotally, though, I don’t get the sense that people I meet on a day to day basis have put much thought into planning their lives around the possible reality of living actively to 95 or 100.

Now, this is not just a personal finance question but it is most definitely a personal finance question.

A quick google search can show that rules of thumb like “Equity allocation = 100 – your age” or 4-5% savings withdrawal rate in retirement are still fairly popular.

But I wonder how well will a rule, set up when life expectancy was 75, with years beyond 65 spent gardening in your backyard, work when life expectancy is 85 with a relatively undiminished lifestyle throughout?

And remember, if you’re reading this post, chances are you have a well above average education, income and appearance! So you would be well advised to replace that 85 with maybe a 95.

We will explore these questions and more over the next few months and hopefully come up with an action plan.

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