Age, Wisdom, and Investor Optimism

by Jennifer Robison, Contributing Editor

It is said that age and experience bring wisdom. However, there are many dubious benefits of aging -- and wisdom can be taken as one of them. A byproduct of wisdom is knowing enough to worry. Another dubious benefit of age is money -- dubious because, as many imminent retirees are discovering, a sour economy can cannibalize savings and holdings, leaving little time for financial recovery.

But though it is sometimes cold comfort, wisdom is always valuable. So it stands to reason that the attitudes and opinions of older investors -- who are likely to be among the most experienced as well as the most vulnerable -- may be particularly meaningful. A close look at the January and February 2003 results for the UBS/Gallup Index of Investor Optimism* shows what the oldest (and youngest) investors are thinking, and may even lend some wisdom to the rest of us.


The economy of the last few years may have provided younger investors with a poor education. First, there was speculation that the good times might never end. Now some economic experts are speculating that it may be years before the economy fully recovers. Some wonder whether young investors may have unrealistic expectations for the economy -- that is, they're either too enthusiastic or too gloomy. But the Index shows a middling sense of optimism in January among investors between the ages of 18 and 39. Overall optimism for this age group was at 44, and the Personal Dimension of the Index (which measures investors' views about their own financial situations) was at 52 for younger investors. The Economic Dimension (which tracks investors' assessments of the national economy) was lowest for the youngest investors at -7.

Slightly older investors, those between the ages of 40 and 49, were the most optimistic in January. Among this group, overall optimism was at 57. This high overall number was driven by the Index's Personal Dimension (55) rather than the Economic Dimension (1).

Investors aged 50 to 64 were the least optimistic. Their overall optimism stood at a dismal 14 in January. Both the Personal Dimension (31), and the Economic Dimension (-17) were lower for this age group than any other.

Surprisingly, the oldest investors, those over 65, were just about as optimistic as other investors in January. Overall, they stood at 54. Their rating of the Personal Dimension showed real composure -- 48 -- and their rating on the Economic Dimension (6) was the most optimistic of any age group in January.


By February, the youngest investors' optimism had shown little change -- at 38, their overall optimism was the highest of any age group. The Personal Dimension was stable at 56, but the Economic Dimension was down to -19.

The 40- to 49-year-olds' overall optimism collapsed in February, from 57 to 10. The Personal Dimension for this group slid 23 points to 32, while the Economic Dimension fell 24 points to -23.

The 50- to 64-year-olds were even less optimistic in February -- in fact, they were the most pessimistic of all age groups. Their overall optimism level fell 33 points to -19. The Personal Dimension was down to 11 among these investors, and the Economic Dimension was the lowest of all groups at -30.

But the oldest investors, those 65 and older, were not totally pessimistic. Overall, they lost 31 points and finished the month at 23. On the Personal Dimension they were at 33, putting them right in the middle of the other groups. On the Economic Dimension of the Index, they were at -10. This is a low number and suggests no great optimism, but it's higher than that of the baby boomers just behind them.

Bottom Line

The economy is not improving. The oldest investors have reason to worry -- and they do. But the results of the UBS/Gallup Index of Investor Optimism suggest that it's the investors facing retirement -- not those on the other side of 65 -- who are hitting a fever pitch of pessimism. Perhaps that suggests that the risk-taking youngest investors and investors who have already retired share another dubious benefit of age: patience.

*Results for the Gallup/UBS Index of Investor Optimism -- U.S. are based on monthly interviews with about 1,000 U.S. investors, aged 18 and older. For results based on each of these samples, one can say with 95% confidence that the maximum error attributable to sampling and other random effects is ±3%. In addition to sampling error, question wording and practical difficulties in conducting surveys can introduce error or bias into the findings of public opinion polls.

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