Gen Z investors are changing their portfolios ahead of the midterm elections at a far higher rate than Baby Boomers, with many responding to political uncertainty by either adding money or moving into safer investments.
Some 72% of Gen Z investors said they had altered their retirement savings or investment portfolios in anticipation of the November 3 elections, according to a Nationwide Retirement Institute survey. That compared with 17% of Baby Boomers.
The figures do not indicate that younger investors are simply abandoning the market. The survey found roughly similar numbers adding money to take advantage of current conditions and shifting into safer investments.
Across all generations, 40% of investors said they had made changes before the election, which will determine which party controls either chamber of Congress.
Mark Hackett, chief market strategist at Nationwide’s Investment Management Group, said the difference may reflect how younger people now engage with financial markets rather than a greater fear of risk.
“Younger investors came of age in an environment where investing is highly mobile, social and increasingly real-time, so adjusting a portfolio can feel less like a major decision and more like an ongoing process with almost no friction between a headline, an investing app and a potential portfolio adjustment,” he said.
The accessibility of trading apps and financial information can help investors, but it can also encourage decisions based on breaking news rather than company finances or wider economic analysis.
“The question, therefore, is less about risk tolerance or volatility, and more about whether greater access to information is improving decision-making or simply increasing the temptation to trade,” Mr Hackett said. “The latter can be fatal for portfolio longevity.”
He added: “For younger investors, frequent portfolio changes can interrupt the power of compounding over decades.”
Advisers urge investors to stay the course
The survey was conducted between late August and early September and included 2,029 investors with at least 10,000 dollars in investable assets, alongside 538 financial advisers and financial professionals.
More than half of the advisers surveyed said maintaining an existing investment strategy was generally the best approach during an election year.
Historical market performance was cited in support of that advice. Since 1950, the S&P 500 has risen in the 12 months following midterm elections, recording average gains of 15%, according to JP Morgan Asset Management.
Past performance does not guarantee future returns, but selling during periods of uncertainty can carry its own risks. Baby Boomers may also be less likely to make changes because many are already drawing down their savings or approaching that stage of life.
Older investors are more likely to have professional advice, with 43% doing so according to Northwestern Mutual. For shares held in taxable accounts, holding them until death can also allow heirs to avoid capital-gains tax.
Mr Hackett recommended that investors maintain diversified portfolios and rebalance them periodically according to their desired level of risk.
Changes can still be appropriate when they reflect personal financial goals, a shift in risk tolerance or changing income needs. However, he warned investors not to confuse uncertainty with lasting damage to long-term returns.
