Do investors get wiser as they get older? Or perhaps age has no influence and performance depends more on the individual than their birth year.
Gathering Data
To find out, we took a look at data from one of our most popular tools – Smart Portfolio. It enables investors to link their portfolios to TipRanks and receive unique insights and analysis into their holdings. With 200,000 Smart Portfolios on TipRanks, we can track a lot of data.
Basic tracking includes which stocks individual investors are buying and selling. Indeed, we make this information available to anyone researching a stock.
Additionally, we can track demographic information. For example, we can see how well different groups of investors perform. This can be according to age, gender, or investing style and is based on data investors opt to share with us.
We extracted new insights to discover how age and investing interact.
Millennials and Technology
Not all age groups invest in the same way. The Economist notes that millennials use technology to invest in shares and bonds. Easy and cheap, they use investing apps like Robinhood, and “robo-advisers” such as Betterment and Wealthfront, replacing traditional brokers.
For instance, Betterment recently revealed that its average customer age is just 35. “A generation reared on smartphones is as likely to trust an app as a well-heeled broker” sums up The Economist. It adds that 87% of millennial investors believe corporate success should be measured by more than financial performance and appear to act on that impulse.
So, will this difference in mindset be reflected in the results of our study?
Success Rate & Average Return
The data suggest that the millennial strategy pays off. In fact, between 2016 and 2020 the under 30s performed best both in terms of success rate and average return. They generated a 60% success rate and an impressive 14.2% average return on their investments, measured over 1-year.
The 30-45 age group came in next with a 59% success rate and 13.3% average return. The 45-60 age group took third place with a 58% success rate and a 12% average return.
Meanwhile, at the other end of the scale, the over 60s delivered a 58% success rate and lower 9.3% average return per investment.
Which Works Best – Short, Medium, or Long Term investing?
We discovered further differences between the generations when taking a look at investing timeframe.
If we break down the investor groups by age and investing timeframe, the best-performing investors again are the under 30s. Those who define themselves as “long-term” investors have a 61% success rate and 13.8% average return.
Interestingly, investors under 30 who take a “short-term” investing approach delivered higher average returns with a 15.5% average, but a less impressive 57% success rate.
Similarly, the over 60s who described their investing style as “short-term” generated the best average return of this age group. They delivered an 11.6% average return compared to 9.2% for “long-term” investors, and 8.7% for “intermediate-term”. However, the success rate was 56% for short investing, falling slightly below the 59% scored for long investing.
Top Stock Picks Per Generation
Finally, we looked at the most popular stocks for each age group.
The most popular stock for each of the groups was, perhaps unsurprisingly, Apple. Microsoft was in second place and e-commerce giant Amazon in third.
But while the fourth most popular stock for three of the age groups was Facebook, the over 60s prefer dividend aristocrat AT&T which offers a 7.74% dividend yield and $0.52 quarterly payout.
Other stocks that feature prominently for younger generations include Tesla and chipmaker Nvidia as well as Chinese e-commerce retailer Alibaba.
Meanwhile, the older generations have more substantial holdings in traditional dividend-paying stocks. These include large-cap biopharma stocks AbbVie and Johnson & Johnson, both dividend aristocrats, and Verizon which boasts a relatively high dividend yield.
Go to Smart Portfolio to see which stocks top investors are buying
