How investment preferences changing

We do keep hearing from our elders about how we have changed and our attitude or approach to life has changed. The same is true when we look at a younger generation or a next generation to us and rue that we'd live in a different way or we have qualms about how the newer generation is approaching a task differently.

Sometimes we may end up doing it better or worse, but the bottom line is that there is a shift in the way the attitudes, style and manner each of these generations adopted at addressing life in general and way of finding solutions in particular.

So, I was intrigued when I'd recently fumbled upon a report on how there's been a generation gap in thinking about investing.

Of course, this is true that each of the generation is tackling different problems at various life stages of their lives but it's the approach that I want to highlight and the attitude towards savings, investing and other related things through this post.

This pits each of the generation dealing different issues of life like retirement by the boomers while career and young family by the Gen X/Z-ers.

There's been enough literature and studies indicating the importance of behavioural aspect that is critical to investing which could be shaped up partly due to their upbringing, exposure to environment or markets, cultural variations, world events that happened during their grasp, the political fallouts and of course the economic cycles they experienced.

All these characteristics form a repository of knowledge that's embedded into our hard wire that drives the decision making while investing. This thus would influence on how one views a particular investment avenue and where the divergences occur among the investors.

A detailed infographic was created by Raconteur that highlights and emphasises the attitude of four generations of retail investors currently involved in the financial markets and their diverse attitudes towards investing.

What's fascinating is the change in priority of the current generation with that of the earlier ones at a particular age. For instance, 45 per cent of the Gen X (people born from mid 60's to early 80's) investors said that their top financial goal at age 27 was to buy a home compared to just 23 per cent of the millennials (people born between mid '90s and early 2000s).

It's not just the investment avenues that vary between the generations of the investors but even the way they approach at investing varies.

While 67 per cent of the millennial investors want computer generated recommendations as a basic component of their investment platform it's only about 30 per cent are comfortable with such an advice for the Gen X and baby boomer (born between mid 40's and 60's) investors.

It's not the approach but even the attitude towards investing is completely different. While 49 per cent of the baby boomer investors are confident about the investment opportunities in the next 12 months, the figure rises to 66 per cent for the millennials.

In terms of knowledge and ability to maneuver the financial markets or investments, millennials are more confident of the command on the subject and feel to possess expertise.

42 per cent of the millennials consider themselves as experts while the response has been limited to under a quarter of the population i.e. at 23 per cent for the boomer investors.

The younger generations are also open to newer and alternate investment opportunities when compared to the older ones. 23 per cent of the millennials are currently investing in crypto currencies while that figure drops to 19 per cent for the Gen Xers and further down to just 8 per cent for the baby boomer investors.

Possibly the investment experience (of having seen or witnessed various cycles) helps the older generations to remain relatively calm during the volatile periods than the younger lots.

82 per cent of the millennial investors have made changes to their portfolios at the end of the 2018 due to the sharp fall in the global equities.

While only 69 per cent of the Gen X investors reacted to the market volatility, it remained lower for the baby boomer generation investors to 47 per cent.

The overall attitude towards not investing ranges from the fears of losing everything to worried about current financial situation to not enough money to trying out at lower commitment to not being able to comprehend the investing.

On these levels too there is a huge deviation on the response provided across the generations. While 42 per cent of the millennials fear that they might lose everything the Gen X and boomers responded to that fear at 29 per cent and 28 per cent respectively.

There are similarities, however, among the generation especially among the non-investors about the comprehension of the investments. The range of respondents of millennials, Gen X and boomers are 63 per cent, 59 per cent and 55 per cent respectively.

While the belief of lack of enough money for investing also remains same across the generations ranging from 55 per cent to 59 per cent.

This only underlines the fact that a higher awareness and education is needed across the generations for making fruitful investment decisions.

(The author is a co-founder of "Wealocity", a wealth management firm and could be reached at knk@wealocity.com)