Young, wealthy investors are less likely to invest in the stock market and more likely to put their money into alternatives, signifying a much more open-minded approach than the generation preceding them, according to a recent poll conducted by iCrowd, a social networking site for investors.
Young investors diversify portfolios
The survey found that young, accredited investors (age 18 – 29) allocate less than 30 percent of their portfolios into equities, compared to the 48 percent of older investors (age 45 – 60). Younger investors also put an average 7 percent of their portfolios into private equity and another 7 percent into hedge funds, compared to just 4 and 2 percent respectively among older investors. There was also a greater willingness to invest directly in private companies, 49 percent compared to 21 percent.
The easy assumption would be that Millennials are cynical about Wall Street, but the survey actually found the opposite. Only about a fifth of young investors believe that Wall Street firms work for their clients’ best interests, but that drops to just ten percent when asking investors age 45 – 60. Younger people are less cynical about the stock market, but they are also less cynical of other investment opportunities and are choosing to diversify more widely.
Facebook generation approach
“When it comes to investing, the Facebook generation takes a less traditional, and much more open approach than their parents did,” said Brad McGee, co-founder of iCrowd. “Young accredited investors are seeking diversified opportunities outside of traditional equities in order to protect and grow their nest eggs.”
The survey only polled accredited investors with over $1 million in investable assets, which doesn’t include your primary residence, or an annual income of more than $200,000. Securities regulations change in September allowing small businesses to advertise directly for capital, but only from accredited investors who can bear the risk (according to the law, anyways).
The iCrowd survey found that 71 percent of accredited investors actually didn’t know that they were accredited or that they eligible to make these types of investments, suggesting that there is a huge untapped markets that small businesses will be able to reach out to directly starting next month.