Generational investment divide: Young favour US while elders back Britain

Generational investment divide Young favour US while elders back Britain

In Q1 2023, young investors exhibited a preference for US markets, while their older counterparts backed British funds, as per a recent report from smart money app Plum.

Notably, 19% of investment inflows from 18-24 year olds and 16% from 25-34 year olds went into the American Dream, a fund focused on the US S&P Total Market Index. This trend highlights the sustained interest in US stocks and shares among these age groups since the beginning of 2023.

Older investors, however, showed a different trend this quarter. Although they still made significant investments in American companies, with 10% of the total investments coming from individuals aged 45 and over, this number is down from 12% in December 2022. Instead, they seem to be favouring UK-based investments. The Plum’s Best of British fund, which tracks the FTSE All Share Index, experienced a more than twofold increase in inflows from those aged 55 and over.

The Tech Giants fund, tracking leading global technology firms like Apple, Microsoft and Alphabet, increased its share of money invested after a dip in popularity in late 2022. From a low of 33% in January, it had rebounded to 37% of investment share in March. However, the oldest cohort of Plum investors demonstrated less faith in tech, with only 28% of their investments going into Tech Giants in March 2023, down from 41% the previous year.

The health and pharmaceuticals fund, The Medic, and the natural resources fund witnessed a drop in popularity this quarter. On the other hand, the Global Gold fund saw increased inflows due to banking industry turbulence in February and March, with inflows more than tripling since December 2022.

Plum’s founder and CEO, Victor Trokoudes, said, “2023 has so far been a challenging one for investors to navigate, with interest rate expectations continuing to move wildly. Tech stocks have been doing much better in this first quarter after a difficult 2022. This is driven by a mix of expectations of interest rate cuts coming by the end of the year and some investors ‘buying the dip’.”

“In times like these it’s interesting to see older investors look to British companies for their investments. Inflation is certainly still painfully high here in the UK, but the composition of the FTSE100, with its banks and energy companies, make it a resilient and appealing choice in the current environment. The UK is also enjoying a welcome period of relative Government stability right now, with the economy proving more resilient than many had suggested.”

Trokoudes added: “Younger investors, unsurprisingly, are more cosmopolitan in their approach to investing. They have a longer investment horizon and therefore tend to take a more aggressive approach to risk. They also are perhaps less patient with defensive options, as seen with their limited interest in The Medic.”

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