The generation of millennial investors, who are now building their careers and beginning to inherit the baby boomer generation wealth, has a very different investment style compared to their baby boomer parents (51-70 years), according to Legg Mason.
The Legg Mason Global Investment Survey 2018 found that millennials were also more optimistic, more willing to embrace risk and open to investing in alternatives while paying a lot of attention to the environmental, social, governance (ESG) factors.
Almost three-quarters of millennial investors said in the survey that they expected to have enough money for retirement compared to only 62 per cent of baby boomers and they were more ambitious in terms of returns they were seeking (8.5 per cent compared to 7.6 per cent for baby boomers).
Legg Mason’s managing director, Australia and New Zealand, Andy Sowerby warned that, on the other hand, millennials might find themselves in the situation where they would not be able to generate sufficient income and growth from their investment to secure a comfortable retirement.
“When we look at the asset allocation they are using as a model for their investment portfolios, Millennials are not embracing growth assets enough to justify their confidence for securing a comfortable retirement,” he said.
“Put bluntly, they need to save more and embrace higher-risk asset classes if they are to meet their longer-term investment goals.”
The survey also revealed that 15 per cent of millennial investors were more likely to invest more in higher-risk investments, such as equities.
“The desire by Millennials to ‘time the market’ and invest in downturns versus Baby Boomers risk-averse attitudes is a sensible precaution.
“Baby Boomer investment horizons will inevitably be shorter, and de-risking investment strategies will make greater sense than for Millennials, who should be thinking long term and focusing on growth assets,” Sowerby added.