When it involves investing, there’s a generational divide amongst wealthy Americans. According to a Opinion poll According to a survey of over 1,000 high net value individuals released today by Bank of America Private Bank, 72% of younger generations (Millennials and Generation Z) imagine it is not any longer possible to realize superior returns by investing exclusively in traditional stocks and bonds, greater than twice as many older investors (Generation X, Baby Boomers and the Silent Generation) who imagine this.
The survey found that Generation Z and Millennials are in search of opportunities outside of traditional markets, with a couple of third of their portfolios dedicated to alternative investments and cryptocurrencies. Older generations reported only 6% of their portfolios being invested in these categories. Perhaps unsurprisingly, then, on average, three-quarters of portfolio allocations for those over 44 are in stocks and bonds, while that figure drops to 47% for the younger group.
“While the majority of high net worth individuals are optimistic about the growth of the stock market, millennials and Generation Z investors are looking beyond traditional stocks and bonds,” said Jeff Busconi, head of wealth management strategy at Bank of America Private Bank, in a video accompanying the report.
Looking more closely, the younger generations surveyed invest 14% of their portfolios specifically in cryptocurrencies, while about half of that demographic owns a minimum of some cryptocurrencies. In contrast, the older groups have just 1% of their portfolios invested in cryptocurrencies. And in terms of the most important growth opportunities, 28% of the younger group ranked cryptocurrencies and digital assets second—behind only real estate—in comparison with just 4% of the older generations who ranked these assets eleventh, tied with personal debt.
Younger investors also said they invest thrice as much of their portfolio in alternative investments (17%) as respondents aged 44 and over (5%). Unlike stocks and bonds, alternative investments include hedge funds, private equity and real estate and “often use more sophisticated strategies such as hedging, leverage and investment concentration.” after to Bank of America. The overwhelming majority of younger generations said they plan to take a position a bigger portion of their portfolio in these alternative investments in the long run. The survey also found that social media is the first source of economic content for about half of Generation Z and Millennials, in comparison with just 6% of older generations.
“These generational differences in the midst of the major wealth transfer already underway make preparation and planning all the more important,” added Busconi.
The Great Wealth Transfer is a cross-generational wealth transfer within the United States by which Generation X, Baby Boomers and the Silent Generation (ages 77 and older) pass on their considerable holdings over the following 20 years. This transfer might be value as much as $84 trillion, with $72 trillion of that going to heirs and the remaining to charities, based on consulting firm Cerulli Associates.
