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Survey: Younger investors different but similar to older generations of investors

Merrill Lynch Private Banking and Investment GroupA new survey by Merrill Lynch Private Banking and Investment Group found that while younger investors in their 20s and 30s are different from older generations of investors, the differences are subtle.

“What we found is a classic perception versus reality scenario,” Michael Liersch, the director of behavioral finance for Merill Lynch Wealth Management, said. “Clearly there are important differences between this generation and its predecessors – every generation has distinguishing characteristics born of its historical moments. However, our findings portray a younger generation that is ambitious, focused on the future, and that has a strong sense of responsibility to family, community and society. These wealthy millennials are savvy, independent and skeptical; they value expertise, question everything and intend to maintain control of their financial destiny, but admittedly lack a high level of knowledge about investing.”

The Young High Net Worth Insights Survey conducted in February studied the goals, behaviors and concerns of investors ages 18 to 35 with investable assets of $1 million or more. Participants in the survey included individuals who inherited wealth and those who acquired wealth through entrepreneurial ventures or high-paying professions.

More than 80 percent of wealthy young investors said they somewhat or fully understand their parents’ approach to investing, and many said their investment approach is similar to that of the previous generation. Sixty-five percent indicated they approach investment in a similar way, while 35 percent indicated they have a different approach.

Additionally, 65 percent said their parents’ approach to investing still works in today’s world, while 35 percent said their parents’ approach would no longer be effective.

Sixty-three percent said they were willing to take on more investment risk with the potential for higher returns, and 78 percent indicated that investment diversification is a priority in order to reduce risk. Forty percent rely on a traditional “buy and hold” strategy, while 31 percent regularly buy and sell with the hope of maximizing gains.

While 27 percent of millennial investors turn to social media and blogs for investment information, 67 percent rely on general newscasts, 58 percent rely on business television newscasts, 55 percent rely on national newspapers and 52 percent rely on magazines.

One-fourth of all wealthy young investors said they have very little knowledge of investment matters, while 56 percent indicated they had moderate knowledge of the issues. Forty-five percent of millennial investors said their knowledge of investment and financial matters is greater than that of their parents’, while 22 percent indicated that it was the same and 33 percent indicated lower knowledge than their parents’.

“Many young adults tell us they feel a tremendous amount of pressure to live up to parents’ expectations and to achieve their same level of success,” Phil Sieg, the head of the ultra-high net worth client segment and solutions with Merill Lynch Wealth Management, said. “These pressures are only exacerbated by the fear of making financial mistakes – even among young adults already quite accomplished in their own right, such as professionals with advanced degrees or key contributors to a family business. But when they don’t ask and parents don’t discuss money, the absence of effective communication can jeopardize family wealth, harmony and even the transfer of certain values from one generation to the next.”

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