- 75% of wealthy millennials doubt that the stock market will generate the returns they desire.
- Only 32% said the same for older investors.
- Young investors are turning to cryptocurrency, private equity and real estate as a way to invest.
Despite this, Stock market strugglesIn the past year, older generation have seen a rise in their numbers still trust itThey have saved their hard-earned wealth. However, wealthy millennials are now exploring other options.
This is according to Bank of America’s annual Study of Wealthy AmericansInterviews with more than 1,000 Americans over 21 with more than $3 million in investable assets were released Tuesday. Interviews were conducted in May & June this year.
The report found that 75% of those surveyed aged 21 to 42 — effectively the millennial generation — felt it was “not possible to achieve above-average returns solely on traditional stocks and bonds.” Only 32% of respondents aged 43 or older agreed.
Survey respondents said that 25% of their portfolios are allocated to stocks. This compares to 55% for older investors. And they dedicate over three-times as much of their portfolios — 16% vs 5% — to alternative investments like private equity, commodities, real estate, and even art. These millennials are also fondly interested in cryptocurrency, which accounts for 15% of their portfolios, compared to 2% for older investors.
Insider was told by Kenneth Shepard of Bank of America’s head of private bank investments, that “younger generations were raised in a period of amazing advancements when new innovations are quickly accepted and old innovations are quickly destroyed.” This mindset is being applied to investments where alternative solutions, such as digital assets and investments, are being viewed positively more than stocks and bonds.
On one hand, you might argue that young investors have little to complain about the stock market’s performance. Despite a hiccup during the Great Recession — and some struggles over the past year — the S&P 500, for instance, has generally been on an UptrendSince the turn of this century.
That said, an individual who invested $100 in the S&P 500 in 1950, 1960, 1970, 1980, and 1990 respectively, would You have seenAs of today, they can expect a return of between 10-11% annually on their investment. An investor starting in 2000, however, would have only seen a roughly 6% return — one of several factors that could be nudging younger investors towards less traditional investments.
Shepard stated that many younger investors formed their opinions about the market as a result of the financial crisis, dot-com bubble and inflationary environment in 2022. “This could have lead to the belief that traditional investments are not as good as alternative ways to invest your assets.”
There is no such thing as “there is” Some skepticismStocks will continue to rise at the same rate they have historically. However, other young investors are less concerned about the stock market’s shortfalls and more on what the future holds. PotentialYou can get even higher returns with other investments. According to the report, the younger investor could have a more profitable approach. 49% of respondents with assets greater than $10 million agreed that stocks can’t generate above-average returns. This compares to 32% and 42% respectively for those with assets between $5-10 million and $3-5million.
Wealthy millennials consider cryptocurrency the best investment.
The wealthy millennial investors see cryptocurrency and digital assets as the best investments for future growth. They also favored real estate, private equity, crypto or digital assets, and direct investment in companies. Older investors preferred US stocks, followed closely by international equities and real estate.
No matter who side they are on, Americans with less assets than $3 million will have difficulty adding private equity and direct investments to their portfolios. Stocks and cryptocurrency are just clicks away.
The one investment that both groups of investors are most excited about going forward was real estate. It has been historically a good investment. Your ticket to wealthFor many Americans. It is an “excellent inflation shield”, provides a tax break, protects buyers from changes to rent and housing prices, diversifies one’s investment, says Laurence Kotlikoff, Boston University economist. Previously told Insider.
But, Rising costsMany people are now unable to afford home ownership, at least temporarily. June Opendoor SurveyOnly 12% of the more than 1,000 millennials surveyed believed they could afford to buy a house. Nearly halfThey weren’t certain they would buy one.
The housing market is still strong There may be cooling — with prices Falling in certain areas — Mortgage rates are highMany prospective buyers find it difficult to afford homes.
Bloomberg DetailA borrower who You are locked inA 3% mortgage rate could purchase a home worth $758,572 with a monthly payment of $2,500. A $2,500 monthly payment could fetch you a $476 425 home, with a fixed rate of close to 7% for the 30-year term.
