Younger generations exhibit caution towards equity markets
KPMG research has revealed which generation has the highest ownership of shares, with younger generations showing a more cautious approach.
The professional services firm conducted an analysis of asset distribution across four generational cohorts, including ownership of shares, cash and superannuation.
In terms of shares ownership, it uncovered that Generation X has overtaken Baby Boomers, with the former holding $256,000 in shares and the latter holding $206,000 on average. The figure indicates Boomers’ desire for less risky assets as they shift into retirement, KPMG stated.
The analysis found that the younger cohorts – Millennials and Generation Z – have considerably lower amounts invested in shares at $51,000 and $7,000, respectively.
According to Terry Rawnsley, KPMG urban economist, this suggests less opportunity for share market investment among younger Australians.
“These lower levels of share ownership among younger generations indicate a cautious approach towards equity markets, possibly due to financial pressures and less cash to invest,” Rawnsley explained.
The economist’s sentiment echoes previous research from ASIC’s Moneysmart program, which discovered that Gen Zs are more concerned about finances than any generation in Australia. Approximately seven in 10 Gen Zs cited finances as a major cause of concern, more than any other age group.
In October last year, the Financial Advice Association Australia (FAAA) explored how financial advisers can personalise their service offerings for Millennials, Gen X and Baby Boomers.
For example, Gen X’s key needs to be met by advice include:
- A realistic plan to achieve a more comfortable retirement.
- Having a sounding board for financial decisions.
- Support in defining and achieving their long-term goals.
Meanwhile, Millennials and Gen Z are more focused on investing with a socially responsible mindset than their older peers and prioritise investing ethically and sustainably, Colonial First State found.
KPMG’s analysis also highlighted that Baby Boomers lead the way for cash and deposits with $242,000, followed by Gen X at $176,000. Millennials and Gen Z hold $104,000 and $26,000 respectively in cash and deposits.
Rawnsley continued: “Baby Boomers are gravitating towards liquidity and higher cash holdings which reflect their inclination towards safer investments.”
Looking at other assets, which mostly includes superannuation and business assets, Baby Boomers and Gen X have comparable holdings at $641,000 and $586,000 respectively.
Millennials and Gen Z hold $260,000 and $43,000 in other assets, reflecting their shorter time frame to add to their superannuation balances or build up a business.
“There is some good news for younger generations in the superannuation asset class as they are coming off a far higher base than their parents. This means the wealth they will eventually accumulate from super will be far higher than older generations,” the urban economist said.
AUTHOR
Jasmine Siljic
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