BNY Mellon study finds that many just don't understand how it works
Seniors may be missing out on fixed income assets because they don’t understand them according to a new survey.
It means that those from the ‘baby boomers’ generation are less likely to understand fixed income assets than millennials particularly the role they play in retirement planning and how they respond to market cycles.
The study from BNY Mellon Investment Management asked: "At what point in time should the average investor consider adding fixed income to their investment portfolios?"
While 36% of millennials said they didn’t know, this increased to 45% among boomers. Millennials were also more likely to have fixed income assets in their portfolios (43% vs. 32% for boomers).
Most boomers (80%) said they fixed income investing is “only for retirement planning” while 70% of millennials and Gen-Xers said this.
"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," said Liz Young, Director of Market Strategy for BNY Mellon Investment Management. "The data also suggests the role financial advisors can play to more effectively communicate how a fixed income allocation can help provide a steady stream of income for a variety of personal circumstances and across economic cycles."
Women don’t ‘get’ fixed income
It’s not only older investors who are not sure about fixed income investing; women are also less likely to have this asset class in their portfolio.
Nearly half (49%) of men surveyed reported having some percentage of their investment portfolios with an allocation toward fixed income compared to just 29% of women.
And the share of women who don’t understand fixed income (49%) is almost double that of their male counterparts (29%).
The survey found that there is also a gender gap when it comes to knowing how to handle their fixed income investments when the market changes.
"People often find it as difficult—if not more so—to talk about money and financial planning than they do about politics, religion, personal relationships, and other emotionally charged subjects," said Young. "It's imperative for the industry to provide clear information that's free of jargon, work to understand individual client goals, and create alongside clients tailored plans that enables them to invest with purpose."
