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Portfolio > Economy & Markets > Fixed Income

Millennials Understand Fixed Income Better Than Do Older Investors: Survey

By Michael S. Fischer

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Millennials have a slightly better grasp than older investors of the role fixed income plays in retirement planning and how the asset class responds to market cycles, according to a study released Monday by BNY Mellon Investment Management.

Asked by pollsters when average investors should consider adding fixed income to their investment portfolios, 36% of millennials said they did not know, compared with 45% of baby boomers, who are much closer to, if not already in, retirement.

Not only that, just 32% of boomers reported having a fixed income allocation in their portfolio, versus 43% of millennials.

Divergent thinking emerged among age brackets in the role fixed income investing can play in retirement planning and how the asset class responds to risk.

For example, 80% of boomers insisted that fixed income investing was intended only for retirement planning, compared with 70% of both millennials and Gen Xers who held this view. BNY Mellon said this suggested that younger investors may see more opportunity in the fixed income space beyond long-term retirement planning.

In addition, while 65% of millennials surveyed said all bonds provided the same level of risk, 76% of boomers believed the same thing.

“This research demonstrates that regardless of age there remains confusion around fixed income investing, as well as the important role it can play in long-term financial planning, Liz Young, marketing strategy director at BNY Mellon Investment Management, said in a statement.

“The data also suggests the role financial advisors can play to more effectively communicate how a fixed income allocation can help provide a steady stream of income for a variety of personal circumstances and across economic cycles.”

Engine Insights’ Caravan Surveys conducted the national survey in July among 1,003 men and 1,004 women 18 and older across a broad range of age, geographic location, education level, ethnicity and household wealth.

Gender Gap

The study identified gender differences around the topic of fixed income and appetite for risk between men and women.

Whereas just 29% of men said they had no understanding of fixed income investing, 49% of women said the same. And 49% of men and 29% of women reported that some portion of their investment portfolio was allocated to fixed income.

Likewise, 46% of female respondents and 33% of male ones acknowledged that they did not know at what point in time the average investor should consider adding fixed income to his or her investment portfolio.

Men and women in the survey expressed varying levels of uncertainty about how fixed income strategies react to changing interest rate environments and market volatility.

If interest rates should go lower, just 24% of men said they would not know what to do, compared with 42% of women.

And in the event of a stock market sell-off — defined in the study as a rapid selling of securities beyond the daily ebb and flow of market prices — 28% of male participants said they would not know what to do, versus vs. 50% of female participants.

This relative lack of awareness about fixed income investing across gender appeared to reflect itself in survey respondents’ approach to risk.

Thirty-nine percent of women surveyed purported to have no appetite for risk, compared with 24% of men.

“People often find it as difficult — if not more so — to talk about money and financial planning than they do about politics, religion, personal relationships and other emotionally charged subjects,” Young said.

“It’s imperative for the industry to provide clear information that’s free of jargon, work to understand individual client goals and create alongside clients tailored plans that enable them to invest with purpose.”

— Check out Wirehouses Warn: 60/40 Asset Allocation Is Dead on ThinkAdvisor.

Michael S. Fischer

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