Bank of America Private Bank’s Biennial Survey of Wealthy Americans revealed a generational gap in perceived best opportunities for investment and asset growth.
“We saw marked differences in investment approaches and mindsets toward investing in general,” said Michael Pelzar, chief investment officer at Bank of America Private Bank. Yahoo Finance.
Market research firm Escalent surveyed 1,007 wealthy Americans on behalf of Bank of America Private Bank. Respondents, divided into a younger cohort (ages 21 to 43) and an older cohort (ages 44 and up), had a minimum of $3 million in investable assets outside of their primary residence.
Here’s what Bank of America found about the young investors it surveyed:
47% of the younger cohort’s portfolios are invested in stocks and bonds. This is much less than the older cohort (74%).
More younger investors are investing in alternative assets than older investors, and almost all young people (93%) said they plan to invest more in alternative assets in the coming years.
Nearly half (49%) of the youth cohort own cryptocurrencies and 38% have expressed some interest. Behind real estate, this cohort ranked crypto as the top area of opportunity.
45% of the youngest cohort own physical gold as an asset, and an additional 45% said they were interested in owning it.
Differences in financial outlook have led to disparities in the allocation of investments and in investors’ perception of opportunities.
Notably, more than 70% of young, wealthy investors no longer believe it is possible to achieve above-average returns by investing exclusively in a combination of stocks and bonds. In contrast, only 28% of older investors share this view.
Young investors’ skepticism of traditional investments comes as the stock market has torn higher in 2024. As Myles Udland wrote this weekthe S&P 500 (^GSPC) is up 42% since the start of 2023, resulting in an annualized rate of return close to 26%, or nearly three times the index’s average annual return of 10% over time.
However, Pelzar sees this difference in perspective as “somewhat understandable,” citing the turbulence the younger generation has experienced in its investing life.
“The younger generation has experienced two market crashes in their investing lives … and then in the last few years they’ve seen an increasing correlation between stocks and bonds,” Pelzar said. “That’s really shaped their thinking about how they should allocate their assets to generate the returns they’re looking for.”
The survey found that the youngest cohort was focusing their asset allocation on alternative investments, and many expressed plans to allocate even more to these investments in the coming years.
Pelzar said this projected increase “largely” reflects the younger cohort’s thoughts on market growth opportunities. Since some alternative asset classes are less liquid, Pelzar said this implies the younger generation is taking a longer-term view.
“You see a very different profile between these two different cohorts, and I think that indicates lessons learned or things that we need to think about in terms of the investment landscape going forward,” he said.
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