Young, wealthy investors more likely to go for broke

In comparison to their more senior counterparts, young high-net-worth investors are more likely to show a preference for assets other than traditional public investments, according to a new study by Bank of America.

The 2024 Bank of America Private Bank Study of Wealthy Americans included roughly 1,000 respondents with $3 million in assets at minimum who were at least 21 years of age.

The study found nearly three-quarters of respondents under 44 (72 percent) agree achieving above-average investment returns solely through traditional stock and bond allocations is no longer possible, compared to just a quarter of respondents from Gen X and older generations (28 percent).

While traditional stocks and bonds still top the list of investment options for older wealthy individuals, younger rich investors place six options above traditional investments:

• Real estate (31 percent)
• Crypto/digital investments (28 percent)
• Private equity (26 percent)
• Personal company/brand (24 percent)
• Direct investments into companies (22 percent)
• Companies focused on positive impact (21 percent)

Consistent with that pattern, younger groups of wealthy investors tended to hold more crypto and alternative investments in their portfolios than older investors. Young investors’ appetite for alts was clear, with 93 percent saying they’re likely to make more investments in alternatives in the next several years.

The preference for more speculative investments appears to cut across aggressive, moderate, and conservative young investors, the research found, with all groups having a nearly even mix of alts, crypto, stocks, bonds, and cash in their portfolios.

“With many industry voices comparing crypto exposure to risk-averse investments like gold, it could be that a cautious mindset is really what dominates some of these portfolio choices,” the report said, arguing that cash, cryptocurrencies, and real estate may appear to be lower-risk investments to the young and affluent.

The generational split in the way investors view risk could also be chalked up to historical events, the report noted, as the millennial generation group grew up through a two-and-a-half year bear market from 2000 to 2002, and the 50 percent collapse in stock prices during the 2008 to 2009 recession.

“There’s also the significant shift of information sharing and authority-sourcing underway in the age of social media,” the report added.

The survey found 48 percent of younger affluent people consider social media their primary source of financial content, compared to their older counterparts who prefer online articles (55 percent) and newspapers (35 percent).