The US market is currently in favour with younger investors, according to the latest investor report from smart money app Plum.
19% of inflows by 18-24 year olds and 16% of those by 25-34 year olds went to American Dream, Plum’s fund focusing on the US S&P Total Market Index, in March 2023. This continues a stable level of investment in US stocks and shares by this age group since the start of 2023.
Older investors have taken a different approach this quarter. While inflows into American companies remain substantial, at 10% of overall investment for those aged 45 and over, this fund is seeing a downward trend from 12% among this age cohort in December 2022.
Instead, older investors are exploring shores a little closer to home with their investments. Inflows to UK companies via Plum’s Best of British fund, which tracks the FTSE All Share Index, more than doubled in March among those aged 55 and over. Its share of inflows now stands at 7% for this age group in March compared with just 3% at the end of 2022. The Best of British fund has seen a small but steady increase among all investors, from 2.5% to 3.5% of total inflows over the past year.
Meanwhile, Tech Giants fund which tracks the largest global technology firms like Apple, Microsoft and Alphabet, has boosted its share of money invested after a dip in popularity in the latter part of 2022. It took 37% of the investment share in March, up from a low of 33% in January, which takes it much closer to the 43% share it enjoyed 12 months ago.
While Tech Giants remains the most popular fund among all age groups, the oldest cohort of Plum investors, aged 55 and over, seem to have had their faith in tech shaken for the long-term. Only 28% of investments were allocated to Tech Giants in March 2023, compared with 41% a year before.
Victor Trokoudes, Plum’s founder and CEO, comments: “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 the USA, core inflation has remained sticky while wages have continued to increase, so more interest rate rises are likely. There are fears that further rises could hasten further financial instability or recession, or in the worst case, both. While this may on the surface appear to be good news for tech stocks as central banks may be forced to cut rates in such a scenario, it’s difficult to see how an economic slowdown is positive for the market.”
“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.”
As the Tech Giants fund grows its share of inflows once more, defensive options are in turn becoming less popular. The Medic, Plum’s health and pharmaceuticals fund, saw a sizable uplift in popularity as Tech Giants shrunk at the end of 2023, but it has decreased this quarter, down to 9% in March from 12% of share in December 2022.
Younger investors are even less keen overall to put their money in health. The youngest cohort of Plum customers, aged 18-24, only put 7% of inflows into The Medic in March, down from 11% in December.
Other notable changes include increased inflows to Global Gold, as investors reacted to turbulence in the banking industry in February and March. Inflows to gold have more than tripled since the end of December. In contrast, Plum’s natural resources fund continued a decline in popularity, halving its allocation between December 2022 and March 2023 as oil prices decreased against the backdrop of fears over a global economic slowdown.
Trokoudes adds: “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.”
“Banking turmoil has clearly led to a clamour for gold as an asset, with the spike in gold investing supported by a weaker dollar. But now the banking sector has calmed, it remains to be seen if this mini gold rush is anything more than a flash in the pan.”
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