How to Position Yourself Today for the Coming $84 Trillion Wealth Transfer |
The data is in… |
Over the next 20 years, we'll see the single biggest wealth transfer in history. |
Nearly $84 trillion worth of wealth will be passed from the Silent Generation and Baby Boomers to their children and grandchildren. |
But these generations won't manage that wealth like their parents and grandparents did. |
If you don't know where they'll invest in the future… You won't know where to position yourself today. |
Fortunately for you, I'll reveal where the data suggests this $84 trillion in wealth is headed – and more importantly, how you can get in front of it. |
Before we dive in, I want you to keep in mind that you don't have to agree where younger generations invest their money. Nor share their beliefs about investing. |
However, if you ignore or dismiss what Millennials and Generation Z plan to do with the $84 trillion they're set to inherit, you do so at your own financial peril. |
The End of Stocks and Bonds Dominating Portfolios |
For decades, the standard American investor's portfolio was made up of stocks and bonds – with some cash available for emergencies. |
Over the past 30 years, the traditional portfolio composed of 60% stocks and 40% bonds would have returned 8.52% per year on average. |
Those returns have made Baby Boomers the wealthiest generation in history. According to Nasdaq.com, they've alone amassed $78 trillion in the U.S. That's half of all wealth. |
But the traditional 60/40 stock-bond portfolio that worked over the previous 40 years likely won't work over the next 40 years. |
In my view, there are two major reasons this strategy won't perform as well in the future as it has in the past. |
The first is equity and bond returns are likely to be much lower in the future. The second is due to changing technological and social trends. |
Let's start with the future performance of financial securities. |
Based on historical standards, stock valuations are trading near record highs. And inflation has driven interest rates higher. |
Today, the S&P 500 trades at roughly 30x earnings. That means for every $1 in earnings the companies in the index generate, they add $30 to their valuation. |
Over the past 100 years, the S&P 500's average earnings multiple is roughly 16. So while stocks could continue to trade higher, it's more likely they'll revert to the mean. |
Another way to measure the value of the stock market is the Buffett indicator, named after legendary investor Warren Buffett. |
The Buffett indicator is a ratio of the total U.S. stock market value relative to gross domestic product (GDP). Today, stocks trade at over 3x the value of the annual GDP. |
On a historical basis, the Buffett indicator is two standard deviations above the mean, suggesting the market is expensive. |
As for the bond market, inflation has driven rates higher over the past two years. And as rates go higher, bond prices go lower. |
While the Fed is making progress on its war against inflation, it's difficult to see rates headed back towards 0% due to concerns over inflation spiking again. And if bond prices don't go lower, we won't see a bond bull market like we did from 1980-2021. |
Given these potential headwinds, it's no wonder 72% of Millennials and Gen Z no longer believe it's possible to achieve above-average returns using the traditional 60/40 split. |
The other changes are technological and social… |
You might be surprised to learn that nearly 1 in 4 Millennials has saved $100,000 or more. |
That's because the average millennial started saving for retirement at 24. Compare that to baby boomers… who didn't start saving until 31. |
Innovations like auto-enroll 401(k)s and easy-to-use smartphone apps have made saving and investing easier than ever. |
And unlike the Baby Boomers, they grew up in the computer age… with tech literally in the palms of their hands. |
Digital currency makes more sense to them than physical dollar bills. They don't even question it. |
These two macro trends (economic and social/technological) are heavily influencing the portfolio allocations of younger generations… |
Different Investment Worldviews |
In June, Bank of America released a study of Americans with over $3 million in investable assets. What the study found was shocking. |
I'm not talking about just a few small shifts between asset allocations. We're seeing traditional asset classes replaced by new and emerging asset classes. |
Take a look at the chart below. It shows the asset allocations among different generations. |
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As you can see, stocks make up 55% of the portfolios of older generations but just 28% for younger generations. |
In turn, younger generations favor alternative investments and digital assets over older generations. |
Younger generations also hold just over 3x more alternative investments than older generations. And they own 14x more crypto assets than their parents. |
Now look at this next table. It shows the most favorable investment opportunities for growth by age groups. |
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The table is a bit complicated, so let me explain… |
Young investors see real estate and crypto/digital assets as the two greatest growth opportunities. For older investors, it's equities and real estate. |
More importantly, crypto assets are at the bottom of the totem pole for older investors. |
You don't need to be a rocket scientist to see where Millennials and Gen Z will allocate their investment dollars in the future. |
Follow the Money |
Look, you might not agree with the way younger generations allocate their money. And that's perfectly OK. |
But I'm a Millennial. And I can tell you without a shadow of a doubt that when they start investing… bitcoin will be part of their retirement plans. |
One study from deVere Group, an independent financial advisory, reported more than two-thirds of millennials said they prefer bitcoin over gold as a safe-haven asset. |
If just 10% of the $84 trillion they're set to inherit flows into bitcoin, it would easily send bitcoin prices to over $600,000 – a 10x move higher from today's prices. |
That's why Daily editor Teeka Tiwari considers bitcoin "the lowest-risk, highest-reward asset in the world." |
But it won't just stop with bitcoin. As younger investors begin to allocate the $84 trillion they're set to inherit, some of that money will inevitably go into altcoins, too. |
If you want to position yourself to profit from the greatest wealth transfer in history today…You need to know which assets younger generations will buy in the future. |
And crypto will be a major asset class for them. |
To get started, simply add bitcoin, Ethereum, and Solana to your portfolio. These are the blue-chip tokens of the digital asset world. |
You can buy them on major crypto exchanges like Coinbase or Binance. |
If you prefer exposure through your brokerage account, consider the iShares Bitcoin Trust ETF (IBIT) and iShares Ethereum Trust ETF (ETHA). |
Full disclosure: I personally own all three of these tokens. |
That's because they're the bellwethers of crypto. By owning them, you'll capture the bulk of the returns we're going to see in the years ahead from this asset class. |
But if you're looking for something with much greater upside (and a bit more risk), Teeka is bullish on six tiny tokens he believes have the potential to 500x your money. |
You can get details about them right here. |
We're about to witness the largest transfer of wealth in history. If you want to get wealthy from it, just follow the money. |
Regards, |
Houston Molnar |
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