Investors keen on stocks during pandemic: Schwab, ETRADE
But differences are apparent between generations and advised vs. non-advised investors.
Self-directed investors are moving out of cash and into equities holdings during the pandemic, according to a pair of reports that shed light on investor behavior.
Equities increased from 26.8% of holdings on March 31 to 30% on June 30, according to a study of self-directed investment activity in retirement accounts by Charles Schwab. Meanwhile, cash made up 18.5% of holdings at the end of March but only 16.6% at the end of June, the Schwab study said.
Millennials, which Schwab defines as those aged 28-39, had the largest percentage of cash in their portfolios, at 18.9%, down 2.1% from the last quarter. For Gen X, those aged 40 to 55, cash holdings decreased to 17.3%, from 19%, and Baby Boomers, those 56 and older, decreased to 15.9%, from 18%.
Investments in exchange traded funds grew slightly but funds allocated to fixed income investments declined in the same period, according to the Schwab report.
Meanwhile, a study by E*TRADE Financial Corporation of the investing habits of younger investors during the pandemic likewise shows investors moving away from cash. More than a third, 34%, of investors under the age of 34 said they are moving out of cash and into new positions–15 percentage points higher than the total population. And 51 percent of investors in that age group say their risk tolerance has increased since the coronavirus outbreak–23% higher than the total population.
In the E*TRADE study, only 9% of young investors said their investment portfolios have recovered since the beginning of the pandemic, but 50% think it will happen in the next six months, compared to 33% of the total population.
And E*TRADE found that young investors are trading more frequently since the pandemic–51% of those under 34 are trading equities more frequently and 46% are trading derivatives more frequently, compared to 30% and 22% of the total population, respectively.
In the Charles Schwab study, only 11 percent of millennials used an investment advisor, compared to 40% of baby boomers and 45.7% of Gen X investors. The average balance for an advised account was $446,638, up from $395,618 last quarter. Non-advised accounts averaged $246,239, up from $216,729 in the last quarter. Overall, trading volume remained similar to last quarter and increased compared to last year.
Schwab found that investors using advisors had a more diversified asset mix and lower concentration in particular securities, including the most popular holding, Apple. Advised investors had 8.9% of assets in Apple, compared to 11.5% of non-advised investors. Advised investors also had a lower percentage of assets in cash–7.4%, compared to 20.7% for non-advised investors.
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