What is a Baby Boomer?
According to Merriam Webster - Baby Boomer is a person born during a period in which there is a marked rise in a population's birthrate. This term is used primarily for a person born in the United States following the end of the Second World War and in the years from 1946 to 1964. Though this is the literal meaning, in general terms, this word is used to describe the older section of our society.
What is the story behind the baby boomer term?
Most nations' economies and industries were destroyed after the World War 2, and only the US was thriving. The country turned its war production into consumer products to meet the world demand, and it had no such competition from other countries. It led to the fastest growing economic prosperity for the nation and created the highest standard of living in any country ever witnessed in such a short span of time. From the automobile to telecommunication to atomic energy, most of the industries in the US were booming along with its population. Hence the children born during this time are called boomers.
Generational cohorts are defined mainly by birth year, not current age, there are other cohorts such as Generation X, Generation Y or Millennials, and Generation Z. The term "Millennial" has become popular, and Generation Z is the youngest people on the planet right now.
The baby boomer generation is the progeny of the Silent Generations and precede Generation X. They are also known as parent of the Millennials. The silent generations grew up with the hardship of the Great Depression and won World War 2. On the other hand, baby boomers had everything handed to them in the era of newfound prosperity.
The first use of the word baby boomer is from January 1963. The Daily Press newspaper article described an increase of college enrollments as the oldest boomers coming of age. In the Oxford English Dictionary, the term dates to a January 23, 1970 article published in the newspaper The Washington Post.
This new generation of the Post War era were the inhabitants of the modern world, which concluded the war following it countries around the world came together to lay the foundation of the Universal Declaration of Human Rights. Its purpose is to provide equal human rights and also value and protect all lives regardless of faith, colour, and gender.
When were the baby boomers born?
In most of the Western countries, the baby boomers are referred to those born immediately after the end of World War II with the rise of the birth rate that came with it. Interestingly in Australia, the birth rate was on the rise, even during WWII. In Europe, birth rates started rising from the mid-1930s, and it saw a post-war baby boom which lasted till the late 1960s. In China, the baby boom cohort is the largest in the world. For Korea, the baby boom happened after the Korean War. Its government then encouraged people to have two children.
In the US, baby boomers are as much as 20% of the entire American population. The population played a substantial role in shaping American culture at large. Currently, most boomers are at retirement age, a matter of great concern as to how the country will deal with the ageing population.
Why is the baby boomer’s generation so significant?
The generation before baby boomers faced a lot of difficulty in the US. They saw the Great Depression; during the war, they endured food shortages etc. When it was all over this generation could finally afford to have a lot of children. The post-war era also saw a wave of unprecedented economic prosperity. With it came the optimism for a better life. The spike in birth rate elevated American fertility rate hike, and it continued for another 18 years.
With the growth of these boomers from babies to children to adults to now seniors, the US reshaped itself. Different industries saw unprecedented growth, manufactures and advertisers targeted this new generation in the new prosperous world. Baby boomers dominated the popular culture in the 1950s and 1960s. They led the social change, which changed the basic fabric of the country. Be it the Civil Rights Movements or protest against the Vietnam War, the boomers were the forefront of it. They also gave a platform to the feminist movement. Their concerns and life experiences show a significant influence on American culture.
How do baby boomers want to plan their life ahead of retirement?
We need to understand the baby boomers are the generation of first men to walk on the moon, and they are the generation which promoted civil rights and encouraged an end to the Vietnam War. They also were high spirited and wanted to change the world to be a better place, but they also witnessed assassinations of iconic figures like Robert Kennedy, Martin Luther King. Depression-era parents raised them. Most importantly, they saw the rise of technology.
Children of Baby boomers have seen a massive change in technology across. A quick read through How has Trading Changed for Millennials? Technology Taking Charge in Shaping Trading Habits, will help to update on how stock trading changed for them.
Now that the baby boomers are at the retirement age or already retired, study suggests most of them plan on fulfilling their bucket list items like travelling or living in the countryside on a farm. The Greatest or the Silent Generation had very few investment options, typically in bonds or certificates of deposit. But baby boomers have a varied range of options to grow their hard-earned money and also enjoy its rewards. Industry experts suggest that the baby boomers may choose not to retire early. It could mean postponing retirement, or consulting or getting a part time job. Another important aspect is healthcare. Many baby boomers are in their last 60s and early 70s, it's never too late to work on the healthcare plan.
Also read: Five Smart Investment Tips for Millennials
Nanny tax is a tax that is ought to be paid by the individuals who employ household help, such as a babysitter, maid, or home health aide, and pay them higher than a stipulated level amount in the course of the tax year. More generally, it is a part of Social Security and Medicare taxes paid by the employer of a nanny, gardener, or other household worker, thus enabling a household employee to receive the benefits and protections of being paid legally.
The bonds that have a par value below $1,000 are termed as baby bonds. These bonds carry the same type of coupon, terms and maturity as the traditional bonds. The main purpose of baby bonds is to bring smaller investors into the market and to provide funding for smaller companies.
What is Online Banking? Online banking is a process of undertaking banking transactions via the internet; hence it is also known as internet banking or net banking or web banking or digital banking. Through the electronic payments system, users are enabled to access and perform a wide range of financial and non-financial transactions without the need to visit the financial institution's branch. GOOD READ: Australian Banking Space Amidst Virus-Induced Volatility; Digitalisation Turning Over a New Leaf What is the Significance of Online Banking Viz-a-Viz Traditional Banking? Online banking offers most of the services which are traditionally offered at the local branch. Users can check account details, access fund transfer and undertake tax payments. Apart from the essential services, users can also avail PPF and other insurance-related facilities, credit card and other such payment services, government schemes, etc. All these services are available on internet banking outside the regular banking hours, which is why online banking seems to be most convenient for the users. Net banking is considered more comfortable and often less expensive as well. Most of the brick-and-mortar banks now offer online services. Besides, the online-only banks or Neobanks are also growing in number and popularity because of the increase in demand. Moreover, for any user, it is essential to understand if the net banking experience is right for the needs and specifications. ALSO READ: Banking And Fintech Collaboration: Does The Road Less Travelled Hold Potential? How Does Online Banking Work? Online banking can be undertaken via: Accessing the official website of the particular bank on desktop/ computer or smartphone/ tablet Downloading the official mobile application of the bank like any other Android app or iOS app Unlike traditional banking, users can avail online banking services as per their convenience. There is no need to visit the bank's branch physically. With the fast-moving life, online banking has turned out to be time saving as it can be done from the home, office or on the go - anywhere and anytime. Below are some key steps involved in leveraging online banking benefits: To begin the services, the bank user needs to go on the bank website or download the mobile app. Users need to register themselves on the website or the application using the unique id and password. Once the account is created, users can start accessing all the services it offers. Banking services offered online may vary from bank to bank. Most banks provide the necessary services such as fund transfer, bill payments and viewing account details. Some banks also offer the customers to apply for credit card and avail insurance investment services which they have. Customers can also check the account balance without even logging in. Applying for a loan or making the loan payment can also be done through online banking. What are the Benefits of Online Banking? With the substantial growth of internet, everything has shifted to the electronic version. Just like one can shop online or trade online, users can bank online. People have access to various electronic gadgets such as laptops, phones, iPads, which make the banking experience one click away to conduct financial transactions. Below are some of the key advantages associated with digital banking: The most significant advantage of net banking is - convenience. A lot many services can be availed anywhere, anytime, instead of going to the bank physically. Online banking can also be done on holidays, which is something impossible in case of traditional banking. Users can make a transaction without going to the bank counter. No need to fill the forms to deposit and withdraw money. No need to abide by the working hours of the bank or worry about the weekend. Through online banking, the bank account and relative services are accessible 24x7. Users only need the electronic device, internet connectivity and account details to access the services. Banks also share the transaction summary and spending overview onlind. Users can understand where and how much money they have spent. It's easier to track the money trail and summarise the funds that come to your account and funds you are spending category wise. The transactions are immediately updated and reflected, therefore making the experience very fast. Through net banking, users can also add multiple accounts of the same bank and keep track of them all simultaneously. Bill payments can also be made online, which saves a lot of time for the users to go to individual entities to make the payments. Users can save on heavy penalties for not paying bills on time. With net banking, credit card bills can be paid on just one click. The user-friendly experience makes net banking very painless and un-challenging to use. Most banks have advanced encryption systems and robust cybersecurity in place, which makes online banking very safe to use. What are the Risks Involved in Online Banking? Online banking is not full-fledged banking; hence there are limitations with the services it provides. Especially for the first-time online banking customers, the systems may present a few challenges, which is why some people prefer transactions with the help of branch officers. The baby boomer generation is not very technology friendly, hence they find net banking challenging. Although most of the banks have robust banking security in place, they still face cybercrimes such as hacking and ransomware. Additionally, online banking is dependent on internet connectivity. Therefore, users who have the internet are only able to access the net banking. Low connectivity issues also make it challenging to conduct banking transactions successfully. Because of the less awareness, users also fall prey to the online financial fraud and identity theft. While accessing net banking, banks advise consumers to use their data plan instead of using public Wi-Fi networks to prevent unauthorized access and further damage. Besides, additional security measures are important to be considered while relying on digital banking. ALSO READ: Technology has changed the way we work amid the COVID-19 crisis: A look at in-demand technologies What are the Non-Traditional Neobanks? Neobanks are the financial institutions which operate purely online. Neobanks are also referred to as smart banks. The growing demand for digital banking has paved the way for neobanks. These banks are accessed through their applications on smartphones/computers. Traditional banks have branches, but neobanks do not have a physical infrastructure apart from their office. Neobanks also have a different technology from the conventional banks as they solely operate online such as they are based entirely on the cloud, and the technology is built from scratch. It is essential to understand that the traditional banks which offer online/ net banking services are not neobanks. Neobanks are entirely different entities and operate exclusively online. GOOD READ: A look at Neobanks and tale of this Self-Styled Neo-lender, Wisr
What are Growth Stocks? Although legendary investor like Warren Buffet has reckoned that ‘Growth and Value Investing are joined at the hip’, the market obsession with the divergences in the market multiples across businesses continues to ignite Growth and Value debate. Thomas Rowe Price Jr is called the father of Growth Investing. Initially a chemist at DuPont, he later opted to work at a brokerage. He set up T. Rowe Price Associates, an investment advisory firm in 1937 and T. Rowe Price Growth Stock Fund was incorporated in 1950. Rowe Price Associates is now T. Rowe Price Group, Inc. – a publicly listed global investment management firm. And the T. Rowe Price Growth Stock Fund is still operating. According to Mr Price, a growth stock should be able to retain growth in purchasing power terms, meaning that earnings of the enterprise should increase at a rate more than the existing level of inflation. He stressed that a cyclical upside in the earnings of an enterprise should not be perceived as the growth of the firm, and the opposite is true when earnings of an enterprise are under strain during a cyclical slowdown. Mr Price often held stocks for decades and noted that Growth Stocks should be held until the growth in the enterprise is exhausted, or the enterprise is no longer a Growth Stock. He published a list of stocks that were owned by him in the 1930s and 1940s, delivering outstanding returns. These stocks were Black & Decker, 3M, Scott Paper, IBM, Pfizer, DuPont, and Merck & Co. Investors chase Growth Stock to realise long-term capital appreciation from the investments, which are expected to deliver better-than-average growth in the share price. Growing companies carry the potential to outperform income stocks since growing companies reinvest their profits instead of distributions to exhibit further growth. Must Read: How To Identify A Growth Stock? What are the features of Growth Stocks? High earnings multiple: As a result of high expectations from the market participants, Growth Stocks usually trade at a high earnings multiples. Not all growing companies pay dividends, the potential returns from growth investments are likely to be realised through capital appreciation. But investors may also feel that the stock is overvalued given its high multiple. Another legendary Growth Investor – Philip Fisher, noted that sometimes high price-to-earnings multiple indicates the intrinsic value of a company rather than discounting for expected growth. Stocks of businesses with long growth run way tend to sustain high multiples as time is in favour of the business. Many growth stocks across the world have traded at high multiples in the era of ultra-low interest rate. Read: Popular Names Under Growth Versus Value Scanner: TLS, XRO, LLC, SPT, PBH Target market: Growing enterprises often have a large target market, allowing the business to grow since there are a large number of customers. It is important that the target market is growing because a slowly-growing target market would also impact the growth of the company. Usually, growth companies are found lead the market be it in terms of scale, industry leading margins, over all market share, etc. A new entrant in the industry: A business could be a growth business when it is a relatively new player in the industry that is challenging other players to gain market share. Since the business is new to the industry, the level of the growth realised by the business could be better-than-average. On account of scale. A small cap company growing strong: Baby Bunting Delivers Strong Profitability Growth New product development & innovation: It is crucial for growing enterprises to continuously develop new products driven by innovation, which would require investments in research and development. A disruptive new product in any industry developed by a business has the potential to gain market share due to its value to the customers. High reinvestment rate: A successful growth enterprise would need to continuously improve its processes and products to deliver a better return on invested capital with sustainable debt. Growth Stocks generally exhibit a high growth rate due to their high reinvestment, which is applied to new product development, enhancement of standard business practices or enter new markets and geographies, especially with high growth potential. A growth stock raising capital: Afterpay to raise 1 billion in Fresh Capital Sound management: Management of a business is responsible for the many important decisions in a firm, whether it is purchasing new machinery or acquiring a business. Investors also study the past projections and compare those to realised results by the firm, allowing investors to form a view on management skills. Qualities of a good management read: 5 Traits of a Good Management Team It also becomes imperative for investors to evaluate how the business has performed in times of distress like an economic slowdown, and how the management of the business has been able to navigate the business out of the crisis. Investors also prefer leadership that has delivered results consistently and has a reputation for thinking out-of-box. Studying management style of leadership would enable the investor to know the risks associated with the decision-making. Moreover, the management team is responsible for capital allocation decision and prudent use of capital that is deployed in the pursuit of growth. What are the risks associated with Growth Stocks? Capital allocation: Capital allocation is a crucial exercise undertaken by the management, and investors carefully evaluate these decisions by management. Since Capital Expenditure would deliver benefits in the future, there always remains a risk of underachievement by the business. It is also important for investors to question the funding sources and the rationale behind those sources. Businesses could take up a huge debt to fund the growth plans, but when the expected outcomes are not realised – the return on capital will deplete. More on return on invested capital: What Is Return On Invested Capital (ROIC)? Growing competition: A new entrant in a market with disruptive products remains a major threat to all existing companies in the industry. As competition grows, the management needs to be proactive and responsive to the underlying change in the industry. Moreover, it is equally important for management to know what their peers are developing and launching in the market. When a business is not paying attention to how its competition is evolving, it could well trigger a crisis for the business. Small & growing enterprises: In most of the cases, a growing enterprise would be a small business seeking to expand and grow due to its relatively small penetration in the target market. Since small businesses have less diversified revenue streams, new business model and lack of experience in the market, these factors could impact the businesses when growth in the target market slows down, especially during times of cyclical slowdown. How to select growth stocks? Growth businesses tend to be leader in a particular category as discusses above. Investors can look for businesses that have shown consistent growth in revenue, margin, market share- if not growth at least sustain market share and show growth in other parameters. These stocks tend to be in good momentum; thus stock price is usually seen trading near or at 52- highs. Growth stocks typically do not provide dividend as they reinvest capital back into the business. Look for good management pedigree as they are the stewards of the business. The management of a growth stock in the 21st century is expected to build a business that is not just robust but also antifragile. To know more on antifragility read here: Developing Antifragility was Essential Pre Covid-19; Now It Is A Must- Taleb Your Go to Guru