- Investors of all ages are upping cash holdings, with younger investors leading the pack
- 60% of investors aged 18 -34 and under increased cash allocation in the last six months vs. just 25% of investors aged 55+
- Inflation (24%) and state of the US economy (22%) are top perceived risks to portfolios
Wednesday, January 10, 2024: Younger investors are nearly twice as likely as their parents’ generation to have increased their allocation to cash assets such as savings accounts in the last six months, according to data from the latest Retail Investor Beat from trading and investment platform eToro. The data found that 60% of investors aged 18-34 increased their cash holdings compared to 25% of investors aged 55+.
While the younger generation leads the pack, increased cash holdings is a new common thread across all ages. Overall cash was the top asset class where investors were most likely to increase their holdings (17%), followed by domestic equities (15%) and domestic bonds (9%). The younger generation is opportunistic with 45% building up cash to earn interest while simultaneously preparing for an uncertain future, with 48% of these investors saving cash for their emergency fund. Older investors (55+) aren’t feeling the crunch of increased cost of living as much with just 25% using cash for higher household costs and 28% boosting their emergency funds.
Commenting on the data, eToro US Investment Analyst Callie Cox, said: “Younger investors see cash more as an opportunity to earn a decent rate than a place to hide. This is good news for the stock market, especially with Fed rate cuts in view. If rates do fall, we could see that cash find its way back into riskier investments.”
Younger investors are paying attention to market risks even as they report high levels of confidence in their investments: 18-34 year old investors cited inflation as the biggest perceived risk factor to their portfolios (24%), followed by increased/rising taxes (20%), highlighting the pressures that are leading them to hold more cash. Older investors (55+) are significantly less worried about rising taxes, just 5% naming increased tax burdens as their portfolios’ biggest threat. However, inflation remains top-of-mind for investors of all ages, with investors citing inflation as the biggest threat to their portfolios (24%) followed by the US economy (22%).
Confidence levels reached a high for 2023 in Q4, with 75% of investors reporting feeling confident in their investments. Retail investors were also confident in their job security (76%) and their income and living standards (68%), the highest both numbers were for the year. For the second quarter in a row, investors ages 18-34 were more confident than older investors (35-55+) across the board, likely due to their long-term outlook allowing them more of a cushion for their investments to grow.
Cox adds: “Younger investors are unusually confident in their financial situations and the world around them, which makes their rush to cash even more puzzling. Decades-high rates are clearly alluring for newer investors, and today’s array of financial tools allows them to take advantage quickly. People are clearly over-indexing on opportunity, which makes us think this buildup of cash won’t be around for long.”
Despite the current popularity of cash assets, they aren’t planning on pulling back on investing. 9 in 10 investors plan to increase their portfolio contribution amount or leave the current amount unchanged in the next 3 months, indicating sustained confidence in the global market despite a tumultuous 2023.
ENDS
Notes to editors
About this report
The latest Retail Investor Beat was based on a survey of 10,000 retail investors across 13 countries and 3 continents. The following countries had 1,000 respondents: UK, US, Germany, France, Australia, Italy and Spain. The following countries had 500 respondents: Netherlands, Denmark, Norway, Poland, Romania, and the Czech Republic.
The survey was conducted from November 27th – December 8th 2023 and carried out by research company Opinium. Retail investors were defined as self-directed or advised and had to hold at least one investment product including shares, bonds, funds, investment ISAs or equivalent. They did not need to be eToro users.
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