Bank of America Private Bank’s biennial survey of wealthy Americans revealed a generational gap in perceived increased opportunities for investment and asset growth.
“What we found were some stark differences in investment approaches and mindset toward investing in general,” Michael Pelzar, chief investment officer at Bank of America Private Bank, told Yahoo Finance.
Market research firm Escalent surveyed 1,007 high-net-worth Americans on behalf of Bank of America Private Bank. Respondents, who were divided into a younger cohort (ages 21 to 43) and an older cohort (ages 44 and older), had a minimum of $3 million in investable assets outside of their primary residence.
Here’s what Bank of America discovered about the youngest investors surveyed:
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47% of the younger cohort’s portfolios are invested in stocks and bonds. That’s much lower than the oldest age group (74%).
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More young investors than older investors invest in alternative assets, and almost all younger investors (93%) said they plan to invest more in alternative assets in the coming years.
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Nearly half (49%) of the young cohort own cryptocurrencies and 38% expressed some interest. Behind real estate, this group ranked cryptocurrencies as the top area of opportunity.
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45% of the younger cohort own physical gold as an asset, and another 45% said they are interested in owning it.
Differences in financial outlooks drove disparities in investment allocations and where investors perceive opportunities to lie.
In particular, more than 70% of wealthy young investors no longer believe that it is possible to achieve above-average investment returns by investing exclusively in a mix of stocks and bonds. In contrast, only 28% of older investors share that view.
Younger investors’ skepticism about traditional investments comes as the stock market is set to soar in 2024. As Myles Udland wrote this week, the S&P 500 (^GSPC) is up 42% since the start of 2023, marking an annualized rate of return of close to 26%, or nearly three times the index’s 10% average annual return over time.
However, Pelzar called this difference in viewpoint “somewhat understandable,” citing the turbulence the younger generation has experienced in their lives as investors.
“The younger generation has seen two market crashes in their investing lifetime… and then, over the course of the last few years, they’ve seen an increasing correlation between stocks and bonds,” Pelzar said. “And that has really influenced their thinking about how they should allocate assets to generate the returns they are looking for.”
The survey found that the younger group focused their asset allocation on alternatives, with many expressing plans to allocate even more to these investments in the coming years.
Pelzar said this projected increase “largely reflects” the younger cohort’s views on growth opportunities in the market. Given that some of the 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 those two different cohorts, and I think that indicates lessons learned or things we need to think about in terms of the investment landscape going forward,” he said.
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