Bank of America’s 2024 High Net Worth Americans Private Banking Study found that Gen Z and millennial investors are increasingly turning away from traditional stocks and bonds and toward alternative investments.
PlanAdvisor said the survey, which surveyed 1,007 high-net-worth Americans with at least $3 million in investable assets, found that 72% of investors ages 21 to 43 believe it’s no longer possible to earn above-average returns from traditional stocks and bonds alone. This contrasts sharply with just 28% of investors over the age of 44 who share this view.
Younger investors have significantly less exposure to stocks and bonds (47%) than older investors (74%), instead allocating 17% of their portfolios to alternative investments, compared to just 5% for older investors. An overwhelming 93% of younger investors plan to increase their alternative investments over the next few years.
The survey highlights the diverse interests of young investors.
- 49% already own cryptocurrency and 38% are interested in buying cryptocurrency.
- Real estate investment is seen as having the greatest potential for growth
- 45% physically own gold and another 45% have an interest in holding gold.
Aaron PhilbeckThe managing director and president of the CAIA association Unifi attributes this trend to recent market volatility and growing opportunities in the private market, he said. Startups are staying private longer and banks are pulling back from SME lending, creating new investment opportunities.
CAIA’s report, “Pushing the Limits,” suggests a “second stage of democratization” in alternative investing, with improved technology and access points allowing a wider range of investors to participate in private market products.
But Philbeck cautions plan sponsors and advisers to carefully consider implementing alternatives, especially for 401(k) plans, because of issues of liquidity, fees and complexity. He encourages an open-minded approach, emphasizing the importance of risk management and due diligence, especially for younger investors who are still a long way from retirement.
The growing interest in alternative investments among younger, wealthy investors signals a potential shift in long-term investment strategies and portfolio construction that investment advisors should pay close attention to.
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