Bank of America Private Bank’s biennial survey of wealthy Americans found a generational divide in perceived greatest opportunities for asset investment and growth.
“What we found were some big differences in the approach to investing and the mindset toward investing in general,” Michael Pelzar, head of investments at Bank of America Private Bank, told Yahoo Finance.
Market research firm Escalent surveyed 1,007 wealthy 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 at least $3 million in investable assets in addition to their primary home.
Here’s what Bank of America found out about the younger investors it surveyed:
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47% of the younger cohort’s portfolios are invested in stocks and bonds, which is much lower than the older cohort (74%).
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Younger investors are more likely to invest in alternative investments than older investors. In addition, almost everyone from the younger generation (93%) indicated that they plan to invest more in alternative investments in the coming years.
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Nearly half (49%) of the young cohort own cryptocurrencies and 38% showed some interest. After real estate, this cohort ranked crypto as the area with the most opportunity.
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45% of the younger cohort own physical gold as an asset, and another 45% say they are interested in owning it.
Differences in financial outlooks led to differences in investment allocations and where investors saw opportunities.
It is striking that more than 70% of younger wealthy 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 this opinion.
Younger investors’ skepticism about traditional investments comes as the stock market has risen in 2024. As Myles Udland wrote this week, the S&P 500 (^GSPC) is up 42% since the start of 2023, for an annualized return of almost 26 percent. %, or nearly three times the index’s 10% average annual return over time.
Pelzar, however, saw this difference in position as “somewhat understandable,” citing the turbulence the younger generation has experienced in their investing lives.
“The younger generation has experienced two market crashes in their investing lives … and over the last few years they have seen an increasing correlation between stocks and bonds,” Pelzar said. “And that has really colored their thinking about how to allocate assets to generate the returns they’re looking for.”
The research found that the younger cohort was focusing their asset allocation on alternatives, with many expressing plans to spend even more on these investments in the coming years.
Pelzar said this expected increase is “largely a reflection” of the younger cohort’s thinking about the growth opportunities in the market. Because some of the alternative asset classes are less liquid, Pelzar said this implies that 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 that there are lessons learned or things we need to think about that are important for the investment landscape going forward,” he said.
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