When it comes to making above-average returns, young wealthy Americans are moving past U.S. stocks.
What Happened: A total of $84 trillion could transition from seniors and Baby Boomers to the younger generations through 2045, according to The Bank of America Study of Wealthy Americans. The younger crowd also believes in investing in real estate like their parents. However, they’re also turning to ideas like alternative assets and the growing cryptocurrency sector.
Perhaps the biggest takeaway from the survey is that 72% of wealthy Americans aged 21 to 43 — with $3 million or more in investable assets — say it is no longer possible to achieve above-average investment returns by investing solely in traditional stocks and bonds.
Respondents 44 and older were the opposite, with only 28% agreeing with not being able to get above-average returns from stocks and bonds.
When asked for the greatest opportunities for growth for wealthy Americans aged 21 to 43, the answers were the following:
- Real estate investments: 31%
- Crypto/digital assets: 28%
- Private equity: 26%
- Personal company/brand: 24%
- Direct investment into companies: 22%
- Companies focused on positive impact: 21%
- Fixed Income: 17%
- Emerging market stocks: 16%
- U.S. stocks: 14%
- International stocks: 14%
Below are the greatest opportunities for growth for wealthy Americans aged 44 or older:
- U.S. stocks: 41%
- Real estate investments: 32%
- Emerging market stocks: 25%
- International stocks: 18%
- Private equity: 15%
- Direct investment into companies: 15%
- Companies focused on positive impact: 12%
- Crypto/digital assets tied for last place among the aged 44 and older crowd at 4%, tied with private equity.
Real estate investing was significantly high for both groups of investors, but scored higher among the younger crowd ranking first.
The biggest difference, outside of perhaps the crypto investments was the U.S. stocks. While investing in U.S. stocks ranked first among respondents aged 44 or older at 41%, the investment strategy was near the bottom for the 21-43 aged crowd getting only 14%.
Seventeen percent of wealthy Americans aged 21 to 43 said they are investing alternative investments, compared to 5% of those 44 and older. The allocation is expected to rise in the coming years, with 93% of those aged 21 to 43 saying they would in the future and 20% of those aged 44 or older.
When asked about specific alternative investment ideas, the younger audience favored:
- Watches (46%)
- Jewelry (39%)
- Rare automobiles (32%)
- Sneakers (30%)
- Sports cards (29%).
The 44 and older crowd favored:
- Coins (27%)
- Jewelry (20%)
- Watches (19%).
Only coins saw a higher percent from the older crowd than the younger crowd.
Related Link: Gen Z Plans On Retiring Early, There Might Be A Key Reason Why
Why It’s Important: The survey found that 51% of the younger wealthy Americans said the U.S. economy was very good, compared to 24% of those aged 44 or older.
Sixty-three percent of respondents believe the S&P 500 — tracked by the SPDR S&P 500 ETF Trust SPY — will go higher in the next year. Twenty-seven percent of respondents say it will stay the same; 10% expect a decrease.
Forty-eight percent of those polled see interest rates declining in the next year, while 21% see interest rates increasing.
The poll shows that the younger wealthy Americans have been decreasing spending, paying off debt and delaying home sales due to higher rates.
As the generations shift, it appears as if more investments will be made outside of traditional stocks. The caveat is the survey was only of those who have investable assets of $3 million or more.
Investors with less capital may still avoid alternative investments and stick to traditional stocks.
Read Next: Gen Z Takes The Lead: Early Investing Trends Soar In 2024
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