Investors do not operate in a vacuum. While it is important for each individual investor to make the proper investment decisions for the needs of themselves and their family, investments often succeed due to a vast interest in one particular product or service.
At the same time, there is no such thing as the average investor. Due to the wide variety of influences, pushes and pulls that impact an investor’s decisions, no two investors are identical in the decisions they make with their investable assets.
Those two truths about investing in America come into play when examining the results from a national study of affluent investors. Spectrem’s study Asset Allocation, Portfolios and Perception of Providers demonstrates trends which currently exist among investors, and how those trends are impacted by the age or wealth of the investor.
The value in knowing how investors overall invest their money comes not in making the same decisions as every other investor. The value comes when an investor recognizes how they differ from the overall investment decisions of affluent investors and determines whether they are making the correct decisions in their own portfolio.
For example, according to investors with a net worth between $100,000 and $25 million (not including the value of their principal residence), 66 percent of total assets are listed as investable assets. That percentage differs most specifically when segmented by age and net worth. Investable assets as a percentage of total assets range from 35 percent in the lowest wealth segment to 74 percent in the highest. Since age and net worth often coincide, the range goes from 48 percent among Millennials to 68 percent among Baby Boomers and World War II investors.
According to the study, 57 percent of all investors employ a financial advisor. That percentage again differs based on age, but in the opposite direction of investable assets, as 65 percent of Millennials use an advisor compared to 50 percent of World War II investors. However, based on wealth, the range starts at 47 percent of those with a net worth below $500,000 up to 71 percent of those with a net worth between $15 million and $25 million.
Robo-advisor usage is far more particular to age groups. While 10 percent of all investors use a robo-advisor, that includes 39 percent of Millennials compared to less than 10 percent among Baby Boomers and World War II investors.
Perhaps the key information about investable assets is how those assets are indeed invested. The study shows that among assets in a managed or robo account, 32 percent are invested in equities and 17 percent are invested in fixed income. Nine percent are invested in short-term investments (while 28 percent were unspecified).
Those are overall numbers. The wealthier the investor, the higher percentage they place in equities, up to 44 percent for those investors with a net worth between $15 million and
$25 million. Likewise, the older the investor, the higher percentage of assets they have in equities, up to 35 percent among World War II investors.
Equities carry with them a higher risk of loss of principal, which is perhaps why those with a lower net worth and those who are younger are invested less in those products. It is easer to take risk with investable assets when you have more investable assets to lose.
People love to make comparisons. But doing so is not always beneficial. In considering how you invest, it is wise to know how others are doing it, but it is also wise to determine whether there is a reason to change your asset allocations to better serve your financial needs.
© 2019 Spectrem Group