Large Cap Stocks Are Top Picks Of Boomer Eecs

Though their relative youth would argue for greater risk exposure than that exhibited by their older peers, the youngest boomers likely favored more conservative investments because of their comparative investment inexperience and because they had fewer assets to invest, Disabato says.

He adds that foreign stocks should account for a growing share of boomer executives’ portfolios. Chief reason: the burgeoning influence of international equities, which now account for approximately 50% of the value of worldwide capital markets, according to Disabato.

Near-term, however, western European equities will continue to dominate international equities markets. Though China and India are increasingly impacting the world’s economy, their capital markets remain underdeveloped.

“In China, there are still a large number of government-owned entities,” says Disabato. “Equities offered by publicly held firms that investors can buy are still small in number. So those markets [China and India] are barely on the radar screen.”

As the eldest boomers retire, Disabato adds, they can be expected to shift their portfolios from high-yield equities to fixed income investments, including bonds and money market funds. The youngest boomers, following their elders’ path, should initially take a larger position in higher risk investments, including small cap stocks, before also redirecting assets to a more conservative portfolio.

In the aggregate, boomer execs are more sophisticated investors than their parents, says Disabato. That helps explain their greater willingness to buy high-risk, high-return equities–including variable life insurance products and annuities that invest in these equities–during their pre-retirement years.

But boomers’ willingness to buy high-risk investments is tempered by the knowledge that their portfolios need to be diversified.

“What [boomer] clients want is to limit risk by investing across asset classes,” says Disabato. “To the extent that financial advisors can bring diversified solutions to their clients, they will be viewed as trusted advisors.”

Clark’s latest executive retirement report, which the company releases quarterly, is the first to explore investment trends among boomer execs. The study examined the investment selections of more than 17,000 executives with annual compensation typically in excess of $100,000. The executives invested in nonqualified retirement plans established through Clark Consulting.

The report looked at investmentsacross nine asset classes, including: balanced, fixed income, foreign, large cap, mid cap, small cap, money market, specialty and world. The selection of asset funds and the allocations within those funds determine the investment return generated for an executive’s retirement account.