Self-Directed Millennials Invested More in Cash, ETFs Than Older Investors

Millennials allocated a larger percentage of their portfolios to exchange-traded funds and cash during the third quarter than did older investors, according to Charles Schwab's quarterly report on retirement plan participant investment activity within self-directed brokerage accounts.

The report, released Tuesday, showed that millennials allocated 24% of their portfolios to ETFs, compared with 20% for Gen Xers and 17% for baby boomers, and allocated 16% to cash, compared with 14% and 12% for older investors.

Boomers held approximately 4% of their portfolios in fixed income, followed by 1% for Gen Xers and 0.8% for millennials.

SDBAs are brokerage accounts within retirement plans — including 401(k) and other types of retirement plans — that participants can use to invest in stocks, bonds, ETFs, mutual funds and other securities that are not part of their retirement plan's core investment offerings.

The report included data collected from some 142,000 retirement plan participants with current balances between $5,000 and $10 million in their Schwab Personal Choice Retirement Accounts.

Gen X comprised approximately 42% of SDBA participants, boomers 39% and millennials 13%.

According to the Schwab data, mutual funds held the highest percentage of participant assets during the third quarter, about a 39% allocation by boomers, 36% by Gen Xers and 34% by millennials.

Equities were the second-largest allocation for all portfolios, with boomers and Gen Xers holding approximately 28% in their portfolios and millennials 25%.

Here are the top three equity holdings for the three generations of investors:

Millennials: Amazon.com, 7.87%; Apple, 6.18%; Tesla, 3.22%
Gen X: Apple, 10.52%; Amazon.com, 7.16%; Berkshire Hathaway, 2.37%
Boomers: Apple, 9.19%; Amazon.com, 5.32%; Berkshire Hathaway, 2.75%

U.S. broad funds were the most popular ETFs, according to the report. The top ETF holdings for all three generations were Schwab U.S. Broad Market ETF, SPDR S&P 500 ETF and Vanguard Total Stock Market ETF.

In addition, all three generations continued to hold the Schwab S&P 500 Index Fund as their top mutual fund, followed by the Schwab Total Stock Market Index Fund.

Other Findings

The average third quarter SDBA balance for all participants was $276,929, nearly identical to the second quarter average balance and 1% above that of the 2018 third quarter.

Boomers had the highest SDBA balances at an average of $394,064, followed by Gen Xers at $213,018 and millennials at $68,756.

The report said that 22% of boomers, 21% of Gen Xers and 15% of millennials used an advisor to manage their SDBA.

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