Millennials allocated a larger percentage of their portfolios to exchange-traded funds and cash than did other generations during the second quarter of 2018, according to an industry benchmarking report.
Charles Schwab’s SDBA Indicators Report, which analyzes investment trends of retirement plan participants who currently invest through self-directed brokerage accounts (SDBAs), reveals that Millennials allocated 23% of their portfolios to ETFs, compared to 19% for Gen Xers and 16% for Baby Boomers.
Millennials also held a slightly higher percentage in cash at 16%, with Gen X and Baby Boomers holding 13% each. Meanwhile, Baby Boomers held approximately 3% of their portfolios in fixed income, followed by Gen Xers (1%) and Millennials (0.5%).
The report is based on data from the second quarter of 2018 collected from approximately 137,000 retirement plan participants who currently have balances between $5,000 and $10 million in their Schwab Personal Choice Retirement Accounts. It tracks a wide variety of investment activity and profile information, ranging from asset allocation trends and asset flow in various equity, ETF and mutual fund categories, to age trends and trading activity.
Allocation Trends
Mutual funds, not surprisingly, continued to hold the highest percentage of participant assets, with Baby Boomers allocating nearly 39% of their portfolios to them, followed by Gen Xers at 36% and Millennials at 32%.
Overall, the market value allocation was similar to last year, the report notes. Large cap stock funds had the largest allocation at 28.2%, down 2% from last year. They were followed by taxable bond funds at 19.7% and international funds at 17.5%.
Equities were the second-largest for all portfolios, with Gen Xers allocating approximately 30% of their portfolios to them, compared with Baby Boomers at 29% and Millennials at 27%. Shifts in equity sector holdings were very minor, with the largest holding being information technology at 30.8%, up 2% from last year. Consumer discretionary was second at 16%, followed by financials (11.6%), health care (10.6%) and industrials (8.2%).
Investing Behavior
The study found that Baby Boomers made up approximately 42% of SDBA participants, followed by Gen X (40%) and Millennials (11%).
The average SDBA balance for all participants in the 2ndquarter of 2018 was $265,902, up 1.5% from the previous quarter and 23% from the 2ndquarter of 2017. Not surprisingly, Millennials had the lowest balance at $61,916, followed by Gen Xers at $194,534 and Baby Boomers at $365,561, up slightly from last quarter.
It would seem that those with advised accounts have a clear advantage. The average participant balance for advised accounts was $436,709, while for non-advised accounts it was $226,283. Baby Boomers had the most advised accounts at 46%, while only 8.2% of Millennials chose to use an advisor.
Those with advised accounts also had more average trades — 9.7 versus 5.5 for non-advised accounts. Baby Boomers also held, on average, more positions (11) in their SDBA than other generations, with Gen Xers holding nine and Millennials holding seven.
Mobile trades were equally popular among Millennials and Gen Xers, with 19% of each generation using that method, compared with 14% of Baby Boomers.
