As the investment landscape evolves, a growing divide is emerging between younger and older investors on a fundamental question: Can you achieve wealth by relying solely on stocks and bonds? A recent survey sheds light on this generational rift, revealing stark differences in how each group perceives traditional investments versus alternative options.
The survey posed a critical question: Is it still possible to achieve above-average investment returns by investing solely in traditional stocks and bonds? Among older investors, the answer was overwhelmingly affirmative, with 72% expressing confidence in these conventional assets. However, an equal share of younger investors disagreed, signaling a shift in investment philosophy. A staggering 93% of younger respondents indicated they are likely to allocate more funds to alternative investments in the coming years, compared to only 28% of older investors.
Dustin Wolk, a wealth adviser at Crescent Grove Advisors in Milwaukee, highlighted this trend: “The survey is asking, ‘Where can I get above-average returns?’ These individuals are answering, ‘I don’t think it’s in stocks and bonds anymore.'”
This generational divergence extends beyond preferences to perceptions of risk. Younger investors, many of whom came of age during the tumultuous years of the dot-com bubble and the Great Recession, have a distinct view of what constitutes a risky investment. Mike Sullivant, head of investor relations at Aspen Funds in Kansas City, Kansas, observed, “I think the great financial crisis, particularly for this generation, was really formational.”
Interestingly, many younger investors now regard alternative investments, including cryptocurrencies, as less risky compared to traditional assets. “Everybody knows someone who’s become a crypto millionaire,” said Craig J. Ferrantino, president of Craig James Financial Services in Melville, New York. This perception is driving a significant portion of millennials and Gen Z investors toward digital assets and other alternatives.
Despite this enthusiasm, financial advisors caution against viewing these alternatives as safe havens. “I would tell someone who is investing in these investments that they are not safe investments,” warned Monica Dwyer, a certified financial planner in West Chester, Ohio.
The survey also highlighted the differing sources of investment information between the generations. Younger investors tend to rely on social media, podcasts, and online videos for financial advice, while older investors prefer traditional sources such as newspapers, television, and online articles. The proliferation of alternative investment pitches on social media platforms has played a significant role in shaping the investment strategies of millennials and Gen Z.
Sullivant pointed out that technology has made alternative investments more accessible to a broader audience. “Now, there are avenues out there and there are voices out there saying, ‘Here’s exactly how you can do this,'” he said. Private equity funds, once the domain of multimillionaires, are now available with buy-ins as low as $25,000.
For younger investors, the appeal of alternative investments is clear. According to the Bank of America survey, the top five investment choices for Gen Z and millennials include companies focused on positive impact, cryptocurrency, private equity, personal business ventures, and direct investments in companies. These investors are increasingly drawn to opportunities that align with their values and offer the potential for significant returns outside the traditional stock and bond markets.
Cryptocurrency, in particular, has captured the imagination of younger investors. Unlike older generations who may view digital currencies with skepticism, millennials see crypto as a natural extension of their tech-savvy lifestyles. Peter Lazaroff, a certified financial planner in St. Louis, noted, “When you look at who gravitated toward crypto, initially, it was a younger group. It was difficult even to understand how to buy it.”
This year, federal regulators cleared the way for ordinary investors to buy and sell bitcoin ETFs, further democratizing access to the world of digital assets. As alternative investments continue to gain traction, the debate over whether stocks and bonds alone can make you rich is likely to intensify, reflecting broader shifts in the financial landscape.
