Investor Habits Differ Across Generations

Nearly half of individual investors (49%) reported they have yet to reevaluate their investment approach in the midst of a shifting economic landscape, according to a recent report by The Dreyfus Corporation, a company of BNY Mellon.

“As long-term risk/return expectations have shifted with an increase in inflation, the rise of U.S. nationalism and record-low volatility, investors would be well-served to reevaluate their portfolios in light of changed circumstances to determine if they will continue to meet their investment objectives,” suggests Dreyfus CEO Mark Santero.

The Dreyfus study found that investors tend to take different approaches to investing based on age. Sixty-one percent of investors 55 years of age or older indicated they have not, or will not, reevaluate their investment approach in today’s existing investing environment. Meanwhile, 65% of Millennials, defined in the study as people between the ages of 21 and 34, had already evaluated their investment approach at the time of the survey. These actions are reflected among 51% of those between the ages of 35 and 54, as well as for 39% of those at least 55-years-old.

Younger investors seemed to be more inclined to seek professional assistance. Sixty-three percent of younger respondents said they worked with an adviser in reevaluating their investments, while only one-third (38%) of those in the older segment did the same.

“Our survey revealed that younger investors have demonstrated in greater numbers a more proactive approach to reassessing their portfolios and seeking out their advisers for counsel, some of whom might lack the historical market experience and accumulated wealth of older investors,” says Santero.

The firm also pointed out that while older investors have experienced historic highs and lows in the global markets, the Great Recession is likely the major market shift that stands out the most in the minds of younger investors.

Surprisingly, the survey also found that affluent investors are taking action to review their portfolios at a slower pace than their counterparts. The research indicated that nearly half of those with investable income between $250,000 and $2.5 million had work to do in reviewing their portfolios, and more than one-third had decided to not take action at all.

Forty-three percent of the total mass affluent investor audience had not reevaluated their approaches to investing, and 39% of mass affluent investors working with an adviser had not reevaluated their investment approach.

Some of these findings are of particular concern considering research projecting low stock market returns in the long-term and uncertainty in the global markets despite an eight-year American bull market.  

Still, six in ten investors (60%) without a financial adviser are most likely to put off their plans to address today’s market challenges. Only one-quarter (24%) report they plan to address challenges they face at some point in 2017. At the same time, 17% said they don’t have any plans to reevaluate their investment approach.

Santero adds, “We believe investors who don’t work with a professional adviser could greatly benefit from the insights an adviser can provide in tailoring a goals-based approach for their individual circumstances against today’s investing environment of uneven economic growth. Options might include diversifying their U.S. exposure with global fixed income and equities or considering dividend or alternative investing strategies.”

As for those working with advisers today, the survey found 65% indicated they had reevaluated their investment approach, compared 40% who had not worked with an adviser. Nearly three-quarters (73%) of advisers’ clients changed their approach as a result of advice.

Information about downloading the Dreyfus Investor Survey Brief can be found here.