Which asset do millennials and Gen Z investors prefer?
Surprisingly, it’s gold. A recent study by Bank of America Private Bank shows that 45% of wealthy investors under 43 own physical gold, and another 45% are interested in it. This is a much higher percentage than other age groups.
Liz Young Thomas from SoFi explains that younger investors usually avoid assets like gold, cash, or Treasuries because they find them “boring.” But with rising Treasury yields and gold prices, these assets are becoming more attractive. Thomas notes, “When assets show strong returns, younger audiences take notice.”
A State Street study supports this, revealing millennials have the highest gold allocation in their portfolios at 17%, compared to 10% for boomers and Gen X.
Why are younger investors drawn to gold?
Gold’s current spot price, over $2,400 per ounce, and its increased availability in retail stores are key factors. For instance, Costco’s sales of 1-ounce gold bars have reached up to $200 million monthly.
Tips for Young Gold Investors
1. Physical Gold Challenges
Gold is tangible and seen as a safe asset during financial instability. Eric Amzalag, a financial planner, says wealthier millennials prefer directly-held gold for capital preservation. However, buying physical gold comes with challenges: finding a trustworthy dealer, secure storage, insurance, and eventual resale.
2. Consider ETFs
Exchange-traded funds (ETFs) simplify gold investment by eliminating the need for physical storage. ETFs backed by physical gold or gold futures make asset exposure easy. Though there are fees, ETFs like SPDR Gold Shares offer convenience and have one-year returns of over 23%. Alternatively, ETFs of mining stocks, such as VanEck Gold Miners, are another option.
3. Balanced Allocation
While gold can hedge against inflation and volatility, it is volatile. Experts advise keeping equities as the main investment due to their potential for sales growth, profits, dividends, and share-price appreciation. Jonathan Cameron, a financial planner, recommends including a gold ETF in portfolios as a small (about 5%) hedge.
By following these guidelines, young investors can make informed decisions about incorporating gold into their portfolios.
