Young 401(k) Investors Jumping On ETF Bandwagon

401k, retirement, Schwab, ETF

Choose your own adventure.

Apparently GTL, OMG and LOL are out. A new (and far more valuable) acronym has surfaced on Millennials’ radar: ETF.

The youngest generation of 401k participants with self-directed brokerage accounts (SDBA) is investing more assets in ETFs than any other age group, according to Charles Schwab’s most recent SDBA Indicators Report.

During the second quarter of 2018, data show 23 percent of Millennials’ investment portfolios were allocated to ETFs. Among Gen Xers and Baby Boomers, this figure was 19 percent and 16 percent, respectively.

Young investors also held more cash (16 percent) than other generations. For both Gen X and Baby Boomers, just 13 percent of assets were allocated to cash.

Schwab’s findings are in line with previous research highlighting how younger investors’ money tendencies veer away from the norm.

In a survey earlier this year, Bankrate discovered almost a third of participants ages 37 and younger prefer cash-centric investments like savings accounts and certificates of deposit over investments with the potential to earn much higher returns. Only one in five older workers 38 felt the same.

Across all generations, not much has changed among investors with SDBA accounts, Schwab noted.

Mutual funds remain the most popular. Baby Boomers allocate just under 40 percent of the portfolios to them. For Gen X, it’s 36 percent and Millennials 32 percent.

Equities come in next, with Gen X, Baby Boomer and Millennials allocating 30, 29 and 27 percent of their portfolio to them, respectively.

Other highlights of Schwab’s report include:

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