How to invest like a Boomer in 2025

One of the loudest laments you hear from potential investors is the sheer impossibility of investing like the Baby Boomer generation.

Basically, so the argument goes, Boomers had everything going for them – free university education, cheap housing, readily available home loan lending and solid employment with rising wages.

On every measure there is no real comparison with the current situation and so the response usually ends with the throwing up of hands conclusion that it is impossible to get ahead in the current environment.

It is not actually a very helpful argument and leads to a lot of despair and hopelessness and an absolute lack of concrete strategies to deal with the investment environment we have now.

Not all boomers did well

The truth of the situation is that not all Baby Boomers did well financially despite the undeniable advantages they experienced.

The really big surprise though is that virtually all of the strategies that successful Boomers used are still very much applicable in today’s economy, with a few twists to allow for the relative lack of affordability of housing.

However, when you get down to it, housing is just one particular asset class and there are plenty of others to choose from, including property if that is still your favourite.

So here is the first of a two week, step-by-step guide on how to invest like a Boomer, even if you are two or even three generations on from them.

Leverage is key

The first and perhaps the most underappreciated Boomer strategy was to use borrowings to expand their asset base and lock in as much capital growth as possible.

The most conspicuous example of this was borrowing to the hilt to buy a house to live in.

While it is true that for many the dream of owning your own house has been put off at least for a decade if not more due to house prices rising to much higher multiples of annual salary, there is no limitation on using borrowings to invest in broadening your asset base even if the asset class may have changed.

Forced savings are vital

The second and also one of the most underappreciated lessons of investing like a Boomer is to use those borrowings as a form of enforced savings.

Housing loans were and still are an ideal vehicle for forced savings but there are plenty of alternatives.

The loan was invested in a capital asset that was hopefully rising in value gently over time and borrowers knew that they had to make their repayments every month without fail.

Initially the housing loan was almost entirely made up of interest payments, but over time the amount owed started to fall and due to inflation the repayments became easier and less onerous on the budget.

That was not always the case with rising interest rates sometimes causing some pain for short periods of time but usually the burden of the loan got easier over the years at the same time as the benefit of having a roof over your head increased and the value of that house went up relative to the loan as well.

This helped the Boomers to even succeed during tough times when high interest rates disturbed their investment method because they were effectively paying back in inflated dollars that were worth much less than those they had initially borrowed.

Contrary to popular opinion, it is absolutely possible to replicate the forced savings technique now even if the asset is no longer a house.

Superannuation is a good example given that it is now about to rise to a full 12% of salary but it is also still possible to use investment borrowings to emulate loan repayments.

Don’t get overcommitted

One of the key features of investing in the Boomer era was to be very careful not to overcommit and be forced to sell your investments.

This is the key reason why housing loans are such an excellent bet for banks right up until today, because Australians will do just about anything to keep paying back their housing loans.

Debt can be a very dangerous instrument but one characteristic of the Boomer generation was that they largely, but not entirely, avoided bad debt which was used to buy depreciating assets such as cars and kept the majority of borrowings for appreciating assets such as a house.

However, the Boomer generation were probably the first to have easy access to credit through credit cards and some of them learned the hard way what a burden such bad debts could become, particularly when you only made minimum repayments and ended up with sticky bad debt with very high interest rates.

If anything, that sort of easy credit has been amplified for the current generations all the way along the spectrum from the inane advertisements for awful payday loans all the way through to the temptations of paying using instalments.

It is easy to say but hard to do to exercise extreme caution with all forms of bad debt borrowings and pay the total off in full every month so that you never get caught up in spiralling high interest loans.

Much better to live on two-minute noodles for a month than to see them become a full-time diet!

Negative gearing and capital gains tax

One of the very common complaints about the Boomer generation is that they used strategies such as negative gearing and capital gains tax concessions to reduce their tax bill.

The interesting thing to note is while some of the rules have changed a little, these concessions are largely still available to be used by the current generation.

Indeed, negative gearing may be an even more powerful tool in the current environment given that assets most suited to the current generation can be bought with entirely tax-deductible loans.

It is also an arguably more important strategy than ever for those on the top marginal tax rates because average tax rates have increased over time and can be quite punishing.

That is why six figure salaries that in the past were considered a sign of having really made it have moved to become more of a necessity given that larger amounts of tax are now removed and the cost of living has risen.

The concept of negative gearing is really quite simple – if your investment strategy costs you more than your investment earns, it can be claimed back against your personal exertion income.

While most people see negative gearing as an investment property strategy, it can be used across all different investment classes and is arguably at its most efficient when used against a share portfolio.

That is because the future tax year’s interest payment can be brought forward and paid in June and then claimed in a July tax return as long as the investors cash flow allows for it.

Similarly, there have been a few changes to capital gains tax but the basis of the tax remains fairly simple.

If an investment you have made increases in value, that value is subject to capital gains tax at your marginal rate but there is a concession if the investment is held for longer than a year and no capital gains taxes are payable at all for the purchase of your principal place of residence.

The real advantage of capital gains tax compared to income tax, which most people don’t seem to understand, is it is only payable when an asset is disposed of.

The key point to remember here is that the owner of the asset is in control of when they sell.

If you plan for the long term, then you can plan to sell assets at times when your personal exertion income is low or even non-existent, such as when retired.

Or even to hold on forever, using the income off the investment rather than selling it.

This means that even if buying your own principal place of residence seems out of reach for now, you may also be able to make a smaller investment that depending on your sale plans will also only be subject to smaller amounts of capital gains tax.

Super really is super

The one area in which current generations really have a strong advantage over the Baby Boomers is with the maturity of the superannuation system.

Where many boomers started off paying just 2% of their salary into superannuation, now virtually all workers will be paying 12% of their salary into superannuation from the middle of this year.

Superannuation remains the gold standard savings vehicle in Australia and offers the benefits of being a forced saving with the bonus of compounding returns in a very low tax environment.

Making sure that you maximise your superannuation is one of the easiest ways to ensure a stress free and financially rewarding retirement.

The key with superannuation is to ensure that you are in a low fee, well performing fund from as early on as you can and to also ensure that your risk profile is accurately represented by your superannuation fund.

In very general terms that means that for those who are young they should choose the highest risk profile that they can while still sleeping soundly at night.

While high growth funds will be more volatile and suffer negative years more often than balanced or conservative funds, they are also likely to have the highest returns over the long term and result in the best possible retirement benefit.

Boomer or bust

So there you have it, it is very possible to invest like a Boomer and to also become accidentally wealthy like many in this post Second World War generation.

It is important to stay positive and in control of your investment strategy, but there are arguably even more tools available today to achieve Boomer-like returns than were around in the much simpler times that the Boomers lived through.

So how do you precisely go about making a Boomer style investment portfolio?

I’ll be going through that with a variety of scenarios next week, using all of the ingredients outlined above so that you too can belong to a generation that is looked at by those coming up with a mixture of envy and wonder.