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An increasing number of young people are relying on cryptocurrencies, ETFs, commodities, rare resources and alternative investments for their portfolios, according to a report performed by Escalade for Bank of America Private Bank.
Young people are looking at ever less traditional investment methods: crypto
BoA (Bank of America) following a survey performed by Escalade (a market research firm) released the results of work done on a sample of 1052 young investors surveyed with significant assets (HNW).
The survey revealed that Millennials, Generation X and Baby investors are increasingly leveraging alternative investments, sustainability and digital resources to generate cash.
The survey was done online between May and June of this year and outlines the profile of the young American investor in a new light; Wall Street and New York City are no longer the center of the financial world, instead, new forms of investing are making an overbearing appearance.
Respondents ranging in age from 20 to 49 are basically divided into two groups, one of which accounts for nearly three-quarters of the total (those up to age 43 excluded).
In this group the survey shows that respondents find it insufficient and unsatisfactory to spend their wealth on traditional returns such as stocks or bonds in favor or of alternative methods, the percentage however changes significantly in the sample between 43 and 49 years of age where it is evident that traditional methods are congruent for 32%.
84 trillion dollars corresponds to the personal wealth of young investors in the States i.e. baby boomers, Generation X and millennials, an immense sum that will follow this trend of seeking alternative investment methods that, it is believed, may last at least until the next 25 years.
Knox, president of The Private Bank of Bank of America, explained:
“Wealth planning is inherently multigenerational. As we see among our clients’ families, financial behaviors and values take shape early in life and survive in legacies passed down from generation to generation. These research findings indicate a larger role for wealth advisors. and the financial services industry are playing in helping families transfer wealth and meet the needs of the next generation.”
The concept expressed by the BoA president can be summed up with the understandable tendency of each generation to seek its own path, particularly in investments.
The survey data: crypto and NFTs
80% of young investors turn their eyes to alternative investments such as private equity, commodities, real estate and other tangible assets.
On average, three times as many funds are allocated to these types of strategies as the previous generation, and half as many are allocated to equities (25%) compared to older investors (5% and 55% respectively).
Nearly half of the sample surveyed appears to have invested in crypto (47%).
Sustainable investments among the upper-middle class doubled from 12% to 26% from 2018 to the present, with up to nearly three-quarters (73%) of millennials compared to 21% of older respondents using sustainable investments.
The survey also shows that for 72% of all respondents, sustainability and going green will have a crucial impact on the future of the planet and the next generations.
Financial education is no longer taboo even though on average around the world parents talk about these issues around their children’s 27th birthday and only half of them consider them ready to face life’s challenges.
The younger generations, above all Millennials and X, are highly predisposed to the use of trusts (90%) for their succession plans compared to previous generations who had a 56% propensity to use them, according to the survey.
As for philanthropic actions aimed at research and development, 76% of respondents, in the female sample the percentage even rises to 88%, prefer to broaden the scope of their philanthropy far beyond that already done by their family in the past.
The propensity for philanthropy is widespread, but only 51% pursue it in action.
Non-fungible tokens, especially those relating to the arts, also enter strongly into the financial plans of Americans of the future. They infer that around 60 percent of art collectors have purchased a piece in the past 12 months and the same percentage believe they will sell a work in the next year to profit from the gap.
Advisors in this picture that sees substantial changes in portfolio orientations by the younger generation have a key role to play in solving the real problems of young investors, out of all, the hottest issues turn out to be tax planning (requested by 88% of respondents), estate planning, which is important for 81% of the surveyed sample, and finally what is the best and least “painful” way to invest in a period of rising rates and bear market (80%).
Current and future generation trends
This important work carried out by Escalade for Bank of America sheds new light on the trends we are going to face and is an important wake-up call for the New York Stock Exchange, which in order to obviate capital flight and thus lower volumes will have to roll up its sleeves and open up to new instruments such as ETFs on crypto, blockchain and cryptocurrencies.
The courage of the new generations in investing and the start of financial paths at a very young age denotes that Baby boomers and the younger generations (Millennials and Generation X) are those with higher financial education compared to the past, and the work done by Bitcoin and other crypto first, and Art and NFTs later, in enthusing new investors has also led them to refine their techniques and make them responsible and competent from their first experiences.
It is a case of saying that the Americans to come will be very pragmatic and open to the possibilities that the market and new forms of investment will be able to give.
Looking forward to the new bullish cycle, it emerges that the new generations are also very attentive to bear market opportunities and those offered by the energy crisis albeit with a concerned eye on the issue of war.