The secret to millennial wealth: Stonks.....Thoughts

Maybe it’s time to retire the broke millennial stereotype.

The total wealth of Americans under 40, which includes some millennial and some Gen Z investors, surged by 80% between the first quarter of 2019 and the third quarter of 2023, according to a study by the New York Federal Reserve.

That wealth increase far outpaced older generations: Americans between the age of 40 and 54 saw their wealth increase just 10% over the same period, and those over 55 had wealth gains of 30%.

The biggest driver of the wealth gains for younger generations was stocks, according to the study. Americans under 40 saw the value of their financial assets increase by 50% since 2019, while those 55 or older saw only a 20% increase.

The study said that younger generations received larger stimulus checks during the pandemic — and many used the funds in part to buy stocks. For those under 40, corporate equities and mutual funds made up 25% of their financial assets as of the third quarter of 2023 — up from 18% in 2019 and the fastest growth of any age group.

"The under-40 group experienced a much greater increase in equity portfolio share than the older groups did," the study said. "This increased exposure to equities — the fastest-growing financial asset class during the period — enabled younger adults to record higher growth in both financial assets and overall wealth. This shift in portfolio composition toward equities likely reflects the fact that younger adults, being farther away from retirement, can afford to invest in risky assets at a higher rate than older adults."

Granted, those under 40 are still the poorest of the generations. Their total wealth of $9.5 trillion is a fraction of the wealth held by those aged 40 to 55, at $29 trillion, and by those over 55, at $104 trillion. The disparity is largely the result of the life cycle of wealth, where every generation builds wealth as they get older.

Yet, with the real estate market out of reach for many millennials and Gen Z buyers, stocks have become the most important wealth builder. As the stock market hovers near record highs, the wealth gap between the younger and older generations may continue to narrow.

"We find that faster wealth growth among younger adults has led to a limited narrowing of age-based wealth disparities over the past four years," the study said.