EDWARD M from PA posted over 5 years ago:

Somewhat interesting data but I don't see much practical use to the individual investor. I guess that exposes my naivety? Do more sunny days affect one's wealth or the frequency of a latte at Starbucks? Yes, yes, and yes? I would argue habits have a greater impact on wealth than life milestones based solely on my own experience.

BARRY J from TX posted over 5 years ago:

Ed, I agree. Even as an economist and life-long data nerd, I got very confused trying to make sense of the "data" and "conclusions" in this article. So, I used the link to download the NBER abstract and pasted it below. I could not get to the actual article (Thank you, Lord). Spoiler Alert. The abstract is easier to follow, but evokes even more questions about the methodology, construct definitions, and statistical analysis used. I fail to see the value in this "research" to AAII members, NBER's mission, or to academic research other than to fill a publish or perish quota. I suggest AAII ask readers to rate AAII articles and authors using a scale similar to the Model Super Star Portfolios so we can evaluate how well AAII and we AAII lifers allocate our resources in our "attention investment portfolio (AIP)." Other than that, I have no opinion. ------------------------------------------------------------------------------------------------------ABSTRACT----------------------------------------------------------------------------------------------------- Wealth Trajectories Across Key Milestones: Longitudinal Evidence from Life-Course Transitions by Gopi Shah Goda & Jialu Liu Streeter, WORKING PAPER 28329; DOI 10.3386/w28329; ISSUE DATE January 2021. ABSTRACT: Wealth varies considerably across the population and changes significantly over the lifecycle. In this paper, we trace out trajectories of wealth across several key life milestones, including marriage, homeownership, childbirth, divorce, disability, health shocks, retirement and widowhood using multiple decades of longitudinal panel data. We estimate both changes over the ten-year period before and after each milestone and assess whether those changes occur gradually or sharply after the milestone. We find evidence of significant long-run increases in wealth associated with homeownership and retirement, and significant long-run reductions in wealth associated with divorce, health shocks, and disability. In general, these changes appear to occur gradually rather than immediately after the milestone. Our results also indicate a large degree of heterogeneity across demographics, socioeconomic status and risk protection from insurance. In particular, those with lower levels of socioeconomic status and those without access to risk protection experience smaller wealth gains (or larger wealth losses) following life-course transitions. These results identify populations and life stages where individuals are most vulnerable to large reductions in wealth.

S A from OH posted over 5 years ago:

EDWARD M I could hardly have said it better. The tendency to accumulate wealth (therefore benefit others & society generally) isn't based on a handful of life-events, but on a long-term pattern of behavior shaped by a coherent view of value. Yes, our personal VALUES directly impact outcomes (personal & societal) in ways that defy specific events. Buying a house is GENERALLY a wise move for personal wealth; avoiding divorce is GENERALLY preferred to divorce - except in case of a poor marriage; but generalities are not general truths. I expect that if Elon Musk had purchased a home instead of borrowing $30k from family to expand paypal - that he and the planet would be a lot poorer. We must consider the alternatives 'compared to what' (as Tom Sowell suggested). Ppl who fail to recognize LT value of capital saving & investment are certainly destined to be poor. I've had biz partners with ~2x the household income that I've experienced, yet have ~5% of the investment assets of my household. The reasons for this disparity is obvious; if you have an emotional need to live in a 'toney neighborhood (despite poor value proposition), to drive expensive leased german cars, to spend 3% of income annually on expensive wine, to send your kids to the 3x expensive college despite it's poorer outcomes - then you and your money are soon parted. If you (or your spouse's) first response to a healthy savings account balance is "let's spend it" instead of "let's double it and live off the gains" then you are on a path toward fiscal mediocrity, or worse. My current bugaboo - at retirement age - is being inundated with investment nonsense; "If you are N years old you should have N% of assets in bonds". Yes *IF you failed to save, then you NEED to preserve your capital at all costs including the horrific bond returns b/c you can't afford any hiccups. That sort of logic doesn't apply if your assets could provide ~4x your living expenses even if pensions & SocSec evaporated. I continue to invest for RATIONAL growth as I have since my 30s. Mine is a privilege conferred to those who save and take reasonable risks; and not available to those who choose to spend every dollar within grasp, to live hand-to-mouth despite relative wealth. Capital formation (investing some LARGE part of income) is the most socially important task that we each have access to. I've known many ppl who have no extra-ordinary skills nor education nor virtues except frugality and became millionaires by their own choices. Luck and chance have almost nothing to do with this. If you CHOOSE to be fiscally responsible, there is an excellent chance your finances will never be a problem.