Workers who want stability in growing their money are opting for fixed-income investments
Millennials have a better grasp of the importance of fixed-income investments in preparation for their retirement compared to their senior colleagues, a new study suggests.
Fixed-income investments get their name from their “fixed” schedule of interest payments. Workers who want to grow their money can turn to this low-risk method of investment to diversify their portfolio, save for the future, and establish a dependable income.
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Research from BNY Mellon Investment Management shows people born between 1980 and 2000 value fixed income as part of their investment portfolio more than those from earlier generations.
Out of more than 2,000 workers surveyed, more than two in five Millennials (43%) claim they have fixed-income investments included in their portfolio. This is higher compared to Baby Boomers (32%) who say they follow the same strategy.
The issue seems to lie in a lack of understanding among older generations on when to add fixed income to an investment portfolio. As much as 45% of Baby Boomers say they don’t know when to use the strategy, compared to 36% of Millennials who reportedly feel the same way.
Moreover, 80% of Baby Boomers claim fixed income is only used to plan for retirement, compared with 70% of Millennials and Gen Xers who have the same belief. In addition, 76% of Baby Boomers and 65% of Millennials agree all bonds have the same degree of risk.
Liz Young, director of market strategy for BNY Mellon Investment Management, says many people still don’t know much about fixed income.
“This research demonstrates that, regardless of age, there remains confusion around fixed income investing, as well as the important role it can play in long-term financial planning,” she said.