Charles Schwab’s SDBA Report for the third quarter, which reports on trends in self-directed brokerage accounts (SDBAs), shows that Millennials had a larger percentage of their portfolios in exchange-traded funds (ETFs) and cash than other generations.
Nathan Voris, managing director with Schwab Retirement Plan Services, tells PLANSPONSOR that Millennials likely favor ETFs because they “grew up with them. As they become interested in investing, a lot of the research they do leads them to ETFs,” Voris says. “Whereas for those closer to retirement, their initial experience with investments was likely in mutual funds or equities.”
While the findings show that Millennials have more of their holdings in cash than other generations, Voris says, “There are certain Millennials who are more conservative than they should be.” But, he adds, “They generally have smaller account balances, so there is some interpretation risk here.”
The findings also show that mutual funds remained the largest holding in the accounts of all generations, and Apple was the top equity holding overall. Baby Boomers allocated 39% of their portfolios to mutual funds, while Gen Xers allocated 36% and Millennials, 34%.
Gen X made up 42% of SDBA holders, followed by Baby Boomers (39%) and Millennials (13%).
Millennials allocated 24% of their portfolios to ETFs, while Gen Xers allocated 20%, and Boomers, 17%. Millennials directed 16% of their portfolios to cash, while Gen Xers directed 14%, and Boomers, 12%. Fixed income was the least popular holding for all generations: Boomers (4%), Gen X (1%) and Millennials (0.8%).
The average SDBA balance for all participants was $276,929, up only slightly from $276,547 in the previous quarter. Baby Boomers’ average balance was $394,064, while Gen Xers’ was $213,018, and Millennials’ was $68,756.
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