Millennials allocated a larger percentage of their retirement portfolios to ETFs and cash through self-directed brokerage accounts (SDBA) than other generations during the third quarter of 2019.
Additionally, the average SDBA balance for all participants in the third quarter of 2019 was $276,929, nearly identical to the $276,547 from the previous quarter and 1% above the average balance from the third quarter of 2018 ($275,362), according to Charles Schwab’s SDBA Indicators Report.
SDBAs are brokerage accounts within retirement plans, including 401ks, which participants can use to invest in stocks, bonds, exchange-traded funds, mutual funds and other securities that are not part of their retirement plan’s core investment offerings.
Schwab found that SDBAs held steady overall during the quarter, with Gen X making up approximately 42% of SDBA participants, followed by Baby Boomers (39%) and Millennials (13%).
Unsurprisingly, according to the data, mutual funds continued to hold the highest percentage of participant assets, with Baby Boomers allocating approximately 39% of their portfolios to them, followed by Gen X at 36% and Millennials at 34%.
Equities were the second-largest allocation for all portfolios, with Baby Boomers and Gen X allocating approximately 28% of their portfolios to them, followed by Millennials at 25%.
Millennials continued to allocate more to ETFs than did Gen X and Baby Boomers, and they also held more cash than other generations.
Baby Boomers held approximately 4% of their portfolios in fixed income, followed by Gen X (1%) and Millennials (0.8%), the report adds.
Important SDBA points
- Baby Boomers had the highest SDBA balances at an average of $394,064, followed by Gen X at $213,018, and Millennials at $68,756.
- Of participants using an advisor to manage their SDBA, 22% were Boomers, 21% were Gen Xers and 15% were Millennials.
- On average, Baby Boomers held more positions in their SDBA than other generations (11.4 vs. Gen Xers: 9.6, Millennials: 7.1).
- Mobile trades were equally popular among Millennials and Gen X, with 22% of each generation using that method, compared to 16% of Baby Boomers.
- SDBA users averaged 6.7 trades in the third quarter (Boomers: 7.3, Gen Xers: 6.7, Millennials: 6.1).
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
