Understanding generational investment choices

The world changes but sometimes the more it changes the more it stays the same.  Similar comments apply to the investment world.  With that in mind, here is a quick guide to the differences between Baby Boomer investors and their Millennial counterparts – along with what has stayed the same.

The generation game – Baby Boomers versus Millennials

As a quick reminder, Baby Boomers are aged 60+ meaning that they were born sometime up to and including 1960.  Millennials are aged 18-36 which means they were born sometime between 1984 and 2002.  This wide age difference means that the two age groups have very different life experiences. 

Baby Boomers will not only have a very clear recollection of 2008 (which some Millennials will be too young to remember) but will remember the many challenges of the decades before that, particularly the 1970s.  In short, they will be only too familiar with change, even if they are not confident with modern technology.

Millennials, by contrast, have lived for a far shorter time, but will still have seen plenty of change, especially changed fuelled by developments in technology.

Equities win for both Baby Boomers and Millennials

Directly-traded equities are the most popular investment vehicle for both Baby Boomers and Millennials.  When it comes to funds, however, Baby Boomers like to stick to plain vanilla investment trusts whereas Millennials are more enthusiastic about ETFs.

Baby Boomers also believe in ethical investing (some of the time)

Over the past five years, Baby Boomers have become noticeably more enthusiastic about ethical investment.  In fact, they are now slightly ahead of Millennials.  Interestingly, however, the top 10 most-held investments amongst Baby Boomers (at 27th April 2020), includes companies such as GlaxoSmithKline, Lloyds Banking Group, Royal Dutch Shell, BP and AstraZeneca.  These may not be names which immediately spring to mind when considering ethical investments.

That said, Millennials also held Lloyds Banking Group, Royal Dutch Shell and GlaxoSmithKline along with Apple and Amazon, the ethical credentials of which have been held open to question, to put it mildly.

Baby Boomers and Millennials have more similarities than differences

Baby Boomers and Millennials both held Scottish Mortgage, Alliance Trust and Fundsmith Equity as part of their top 10 most-held investments.  Putting these together with Lloyds Banking Group, Royal Dutch Shell and GlaxoSmithKline and you can see that 6 of the top-10 picks were common to both groups.

The other four were BP, AstraZeneca, The National Grid and Personal Assets Trust (for Baby Boomers) and Amazon, Apple, Vanguard Lifestrategy 80% Equity and Vanguard Lifestrategy 100% Equity for Millennials.

This suggests that both groups may be more comfortable putting their money into companies with a business model they feel they understand.  In the case of the Baby Boomers that’s energy and pharmaceuticals whereas, with the Millennials, it’s technology.  It will, however, be interesting to see how (if) these preferences develop over future years and how Generation Z will approach investment.

Age and investment choices

Depending on your point of view, you could argue either that age is a huge factor in making investment decisions or that it is completely irrelevant.  You could say it is a huge factor because it can have such a major influence on a person’s tolerance for risk.  For example, younger investors, with a much longer investment horizon, may be prepared to chance their luck with higher-risk investments on the logic that they will have time to recover from any losses, whereas older people who depend on investment income may prefer to play safe. 

On the other hand, while an investor’s age can certainly influence what companies they choose for their portfolio, it does not change whether or not a company has solid fundamentals, effective management and potential for the future.