September 26, 2022
Longevity: Lessons for Investors

Longevity: Lessons for Investors

Have you ever wondered what the Queen of England, Elizabeth II, had to do with her investments? It’s a tough question and seems pointless, isn’t it? However, for all the apparent randomness that this response implies, there is an inescapable reality in our lives: death.

Although it is impossible to escape the end of life, recent developments in society have greatly increased people’s life expectancy, as was the case with Queen Elizabeth, and this change has an impact on many areas of our lives.

Let’s see, then, to what extent longevity and the Queen of England relate to your money and the way you view your investments.

The death of Queen Elizabeth II occupied the covers of all newspapers around the world and appeared in reports on the most diverse topics. It wasn’t for the least. The king ruled for more than 70 years, one of the longest reigns in human history, and had a strong presence, both within the royal family and in society United kingdom.

One of the most discussed topics in the articles, which I think is very relevant to the current context, is the increase in life expectancy and the various impacts on people’s daily lives and, ultimately, on the structure of society as a whole.

The benefit of a long life is not limited to the British monarchy. Homo habilis, the first humans to inhabit Earth more than 2.5 million years ago, lived nearly 30 years, while the current life expectancy is several times longer.

This increase is a result of improving people’s quality of life, and advances in medicine and technology in general. However, it has a huge impact on everyone’s life, as it generates the most diverse demands in areas such as health, psychology, food, and in particular finance and social security, which is the main topic of this article.

The reflection of longevity in the way personal finances are viewed is a relevant issue around the world today, and has sparked many recent discussions and even reforms of public and private pension plans in many countries, including Brazil.

The average life expectancy of Brazilians, which was 52 years old in the 1960s, is improving over time and is now around 77 years, according to the Brazilian Institute of Geography and Statistics (IBGE).

Since everything in the world of economics is relative, this advantage of increased years of life also carries with it the need for increased capital accumulation so that we can pay the bills when our productive capacity declines. According to recent statistics from Serrassa, there are more than 11 million people over the age of 60 in debt, a sad fact that reflects the lack of financial education for the average Brazilian and the increase in life expectancy.

The Queen has been valued at hundreds of millions of dollars and is of course the exception to the rule. For the average investor, who does not own the wealth of the royal family like legacy At your disposal it is necessary to think about the inheritance in a planned and orderly manner, at the risk of experiencing financial difficulties upon the arrival of the third age.

The secret is to think long term

To understand the philosophy of long-term investing, it is important to understand the dynamics of building wealth. In a very brief way, the construction of people’s heritage can be divided into four stages:

  1. When they are children/teenagers, they are dependent on their parents and/or guardians to support themselves;
  2. When they are young, they begin to generate their own income, but usually this is not enough to save significantly. Then, people rise in their jobs, increase their income and enter the next stage.
  3. capital accumulation
  4. The fruiting stage, which is the last stage of life, during which a person actually loses his productive capacity and uses the assets accumulated throughout his life to support himself.

For educational purposes, we will focus our analysis on the necessary mindset of the investor during the third stage, capital accumulation.

Queen Elizabeth II once said, “It is worth remembering that it is often small steps, not giant leaps, that bring about the most lasting change.” The loosely translated phrase means that it’s usually small steps, not big leaps, that produce the most lasting results. Bringing this topic to the realities of the investment world, we can sum up this thought in one word: discipline.

In practice, this means that in order to protect against longevity risk in an investment portfolio, a long-term focus and commitment to recurring investments must prevail.

Major investors, considered experts in the financial markets, have made their fortunes over the years using an orderly and disciplined capital allocation process. Perhaps one of the most famous phrases in this sense comes from mega investor Warren Buffett, who once said that the financial market is a machine for transferring wealth from the impatient to the patient.

Additionally, in times of social media and digital marketing, it is important to stress that investors should avoid bringing in advertisements that offer the opportunity to get rich in a short time with absurdly high returns.