Young and Old Invest Alike, Report Finds

By Brian O'Connell InsuranceNewsNet

U.S. adults of all ages tend to think alike when it comes to investing, a new study found.

That is not necessarily a good thing, investment professionals say.

“Generations do not invest all that differently, but perhaps they should, given their different investment objectives and time horizons coupled with a slow, low-growth environment.” said Darrell Cronk, president of Wells Fargo Investment Institute, which released the study.

“Despite differing views on spending, investing, and building wealth, baby boomers, gen Xers, and millennials don’t differ much in how they act on those views,” he added.

Among the interesting findings, millennials are more heavily invested in fixed income than one would expect.

“This is likely because they were reaching adulthood during the Great Recession,” Cronk said. “On the other hand, millennials have fewer equities in their portfolios than the institute would expect for investors at their stage in life.”

Investing Habits Revealed

In broad brushstrokes, here’s what Wells Fargo discovered about the investment habits of all three generations:

• Equities are the asset group of choice across all generations. Furthermore, older generations appear more invested in equities than younger generational cohorts relative to comparable target date fund.

• Millennials display a slightly higher allocation to fixed income compared with gen Xers. This may be a result of growing up during the financial crisis.

• Baby boomers and gen Xers have higher allocations to other investments—including hedge funds and public real estate— than millennials.

• On average, all generations displayed a higher allocation to cash than the target date funds and higher than the study authors would recommend.

Wells isn’t alone in noting that Americans of all ages investment in similar ways.

In a report from Ally Invest, who shared its data of 250,000 investors in all age groups with InsuranceNewsNet.com, millennials, generation X, the baby boomers, and even the greatest generation (born between 1925 and 1945) tend to invest in the same stock market categories.

All place a priority in semiconductor stocks and funds – it rated highest in all four demographic groups. Equally popular sectors were prepackaged software and pharmaceuticals.

Here’s a ranking of stock market categories by different age groups, according to Ally Invest:

Millennial	Gen X	Baby Boom	Silent Generation
Semiconductors	Semiconductors	Semiconductors	Semiconductors
Information Retrieval Services	Information Retrieval Services	Pharma Preparations	Pharma Preparations
Pharma Preparations	Pharma Preparations	Information Retrieval Services	Prepackaged Software
Prepackaged Software	Prepackaged Software	Prepackaged Software	Information Retrieval Services
Motor Vehicles	Motor Vehicles	Variety Stores	Unclassified Establishments
Variety Stores	Variety Stores	Motor Vehicles	Variety Stores
Computers	Unclassified Establishments	REITs	Computers
Unclassified Establishments	Computers	Unclassified Establishments	REITs
Eating Places	Commercial Banks	Computers	Motor Vehicles
Commercial Banks	Eating Places	Commercial Banks	Commercial Banks

Do Not Overreact

What should investment advisors, who are accustomed to tailoring portfolio strategies that are unique to different age groups, make of the new survey data?

For starters, do not overreact.

“My experience, managing my own money and my clients’ money, is that people invest differently at different stages in their lives,” said Edgard Baqueiro, managing partner at Mexico-based Seguros B&C.

That trend is attributable to the fact that investing is a never-ending learning process, Baqueiro said.

“When I was young, I simply didn´t know about investment concepts like asset allocation and proper diversification,” he noted. “I was in a hurry to make as much money as possible in the shortest amount of time. After losing 50 percent of my savings, two different times, I became wiser.

“Consequently, I believe that people that have been fortunate enough to learn the basics of investing will make the same decisions, regardless of their age,” he added.

As Americans increasingly lead longer, more robust and healthier lives, Cronk said there’s a “narrowing generation gap” among baby boomers, gen X, and millennials.

The generations increasingly work together, deal with family issues together, and even use automated investing tools and technology once thought to only interest the young.

“Investing is a dynamic endeavor, and each generation should plan accordingly as they continue along their financial cycle of life,” Cronk said.

Brian O'Connell is a former Wall Street bond trader, and author of the best-selling books, The 401k Millionaire and CNBC's Guide to Creating Wealth. He's a regular contributor to major media business platforms, including CBS News, The Street.com, and Bloomberg. Brian may be contacted at [email protected].