Millennials continued to pile exchange-traded funds onto their investment portfolios during the third quarter of 2019, according to Charles Schwab’s report on self-directed brokerage accounts (the “SDBA Indicators Report.”)
The quarterly report, which analyzed the accounts of 142,000 retirement plan participants holding between $5,000 and $10 million in their Schwab's self-directed accounts, showed that millennials (those age 27 to 38) allocated 24% of their investments to ETFs, while the figure was only 20% for Gen Xers and 17% for baby boomers (those 55 and older).
The data also showed that millennials are the least interested in working with an advisor to manage their self-directed accounts. Only 9.9% of the millennials chose to use an advisor, while 44.2% of Gen Xers (age 39 to 54) reported having advised accounts; boomers were close behind with 42.5%.
It’s worth noting that the average participant balance for advised accounts almost doubled that of non-advised accounts, the data showed. The advised account balance rose to $449,972 from $448,515 during the last quarter, while non-advised accounts were at $234,087.
Participants who used advisors had a more diversified asset allocation mix and had a lower concentration of assets in particular securities, with Apple being the top overall equity holding. Advised participants also had a lower percentage in cash.
As for ETF holdings, advised participants again had more balance, not having more than 4% of any one ETF.
The data also showed the average account balance for all participants in the Schwab self-directed accounts held steady, up less than 1% to $276,929 from $275,362 a year ago and almost the same as the third-quarter 2018 level of $276,547.
As expected, the report said, the baby boomers ended the quarter with the largest average balance, $394,064, up from $391,526 last quarter. Gen X followed with $213,018 and millennials came in at $68,756.
Mutual funds, the data showed, continued to hold the highest percentage of participant assets, with boomers allocating approximately 39% of their portfolios to them; Gen X followed with 36% and millennials with 34%. Equities were the second-largest allocation for all portfolios, with boomers and Gen X allocating approximately 28% of their portfolios to them; millennials came in at 25%.
Information technology was the largest equity sector holding at 25.56%, which was very close to the same level as last quarter, the report noted. Schwab also pointed out that Apple stock, part of the IT sector and the largest individual stock holding in self-directed brokerage accounts at an average level of 9.48%, increased slightly from the second quarter.