Poor, spoiled, disadvantaged Millennials.
The myth of the underdog youngster has been going around in the media for years.
He’s the poor schmuck who at age 32 still hunkers down in Mom and Dad’s basement because his post-graduate education only fetches him a position as PhD burger flipper at the Scottish restaurant chain which shall not be named.
Marriage and homeownership? Not for this guy. According to the myth, he’ll be lucky if he can dig himself out from under his student loan debt one day and afford an apartment that isn’t populated with stoner roommates and cockroaches.
However, when you take a closer look at the Legg-Mason 2017 Global Investment Survey, an in-depth annual study of investing styles, it paints quite a different picture.
Baltimore-based Legg-Mason, by the way, is a global asset management company that has conducted its surveys for the past five years, aiming to better understand investors’ hopes, fears, and motivations.
Here are some of the amazing results.
Millennials Aren’t Half As Bad As Their Reputation
The first surprise when analyzing the survey is that Millennials (18–35 years old) seem to be sophisticated investors who actually have a leg up on the older generations, the Gen-Xers (36–52) and Baby Boomers (53–71).
Only 14% of Millennials say that don’t have any savings or investments, compared to 19% of Boomers.
The generation that might have suffered the most in the financial crash of 2008 are the Gen-Xers, a cohort that generational researcher Neil Howe compares to the overlooked and unloved middle child: a full 25% of them say they don’t have any savings or investments.
Asked about their investment approach in the past three years, fewer Millennials and Boomers—11% and 9%, respectively—admit to fear-based investing than Gen-Xers with 13%.
Work, Life, and Retirement Goals Achieved? Check
Millennials also seem more accomplished overall than the older generations when it comes to life goals.
More Gen-Xers (50%) and Boomers (46%) feel that they have yet to achieve their top goal of earning “as much money as I can,” whereas only 43% of Millennials stated the same.
Of course, making a lot of money may not even be one of Millennials’ top priorities.
In a subsequent question that asked which work life goals they had already achieved, 48% of Millennials said, “to work just enough to have a nice lifestyle”—a goal that didn’t even make the top five on Gen-Xers’ and Boomers’ priority lists.
When looking at Millennials’ home life goals, it becomes obvious that the stereotype of the young slacker is far from correct.
51% of Millennials found it important to “build an inheritance for my children/heirs.” 57% said they’d already achieved their goal of living on their own, 49% had gotten married, and 48% had started a family.
An astonishing 45% of Millennials already own a home.
Millennials’ attitude toward money is characterized by a frugality we don’t see in their older counterparts. As a result, getting out of debt is one of the retirement goals 37% of them have already achieved. Only 26% of Gen-Xers and 36% of Boomers claim to be so lucky.
Equally amazing: more Millennials (24%) than Gen-Xers (15%) say they’ve achieved early retirement.
Moreover, 31% of them say they live abroad (only 19% of Gen-Xers and 7% of Boomers do), and 33% of them say they own a vacation home. Only 21% of Gen-Xers and 15% of Boomers can afford that kind of luxury.
Millennials: The Most Conservative Investors with the Highest Returns
Most Millennials say they’re “very optimistic” about their investments for the coming year, whereas most Gen-Xers and Boomers state that they’re cautiously optimistic.
On the other hand, a full 57% of Millennials confess that their saving and investment decisions are strongly influenced by the 2008 crash, while a whopping 56% of Boomers state their decisions are “not at all” influenced by the crash.
The question is whether the Boomers’ carefree attitude represents forward thinking or dangerous amnesia.
Another one of the big surprises of the Legg-Mason survey is that Millennials—the youngest and purportedly least experienced group—report the highest returns (9.22%) on their income-producing investments, exceeding their expectations of 9.18%.
Gen-Xers sought more modest returns of 7.02% and got 8.14%.
On the other hand, Boomers’ real returns proved disappointing: they sought an 8.81% yield, but only received 5.66%.
What’s interesting is that at the same time, 85% Millennials describe their overall risk tolerance in long-term investing as “very conservative” or “somewhat conservative,” whereas only 77% of Gen-Xers and 74% of Boomers do.
With 24%, Boomers showed the highest number of “somewhat aggressive” investment behavior.
Are Millennials Savvier Than Everyone Else?
So how come that Millennials, though more risk-averse than their older counterparts, get the highest returns?
One of the answers might be international diversification. Millennials have it, Boomers don’t. Gen-Xers lie somewhere in the middle.
According to the survey, 88% of Millennials hold foreign investments, and only 33% hold investments inside their home country. The Boomers’ numbers are reversed—83% invest at home and only 40% abroad.
Asked about recent investment decisions they are pleased with, 18% of Millennials and 14% of Gen-Xers cite “investing abroad.” Only 1% of Boomers said the same.
30% of Boomers consider “global uncertainty” as a major barrier to international investing, but only 18% of Millennials and 24% of Gen-Xers think so.
Both Millennials and Gen-Xers think that the UK, Japan, and China represent the best places to invest over the next 12 months; Millennials also frequently name Europe.
On the other hand, a full 51% of Boomers say they don’t know where the best foreign investment opportunities lie… an uncertainty that is shared by only 15% of Millennials and 32% of Gen-Xers.
Gen-Xers and Boomers: Way Behind in Preparing for Retirement
How disadvantaged Gen-Xers have been in their work and home life becomes clear when we compare personal income. While Gen-Xers should currently be in their prime earning years, their median income ($71,875) actually lags that of Millennials ($76,945).
Boomers are on average the poorest with a median income of $41,850, although this might be explained by the fact that many of them are already retired.
At $100,674, Millennials have saved only about $10,000 less for their retirement via Defined Contribution (DC) plans than their older brethren, the GenXers. Boomers, who are already entering retirement, are the worst off with only $125,358.
Millennials also look much better prepared in terms of asset allocation. Unlike Gen-Xers and Boomers, their portfolios are much more diversified across all asset classes—with a relatively even distribution between cash (25%), equities (20%), fixed income (17%), investment real estate (14%), and non-traditional investments (13%).
With 11%, Millennials also own the highest percentage of physical gold. (Learn more about precious metals investing in this free report.) GenXers come in second with a 7% allocation to gold and silver.
Boomers, overall, seem to be the least diversified investors: 77% of their assets are in cash, equities, and fixed income, with a meager 8% in investment real estate, 4% in non-traditional investments, and just 2% in precious metals.
That means without a sufficient amount of “crisis insurance,” when the next recession or stock market collapse hits, our oldest generation will also be the most vulnerable.
Millennials, for all the abuse they take in the media and the narratives of the older generations, are by and large a much more put-together generation than we give them credit for. Consider that the next time you read what a bunch of good-for-nothings they are.