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This Chart Shows How Different Generations Would Invest $10,000

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This Chart Shows How Different Generations Would Invest $10,000

How Different Generations Would Invest $10,000

The Chart of the Week is a weekly Visual Capitalist feature on Fridays.

If someone slipped you a $10,000 check and told you to invest it, what would you do with the money?

With no strings attached, there is a wide variety of ways that you could deploy that cash.

You could look at it as a one-time windfall that could shore up your personal balance sheet, or you could go at it much more aggressively. It’s money that you didn’t expect to receive, so why not throw it at high-risk, high-reward assets?

How to Invest $10k?

Today’s chart is based on a survey from LendEDU, which posed this exact question to 1,000 Americans in March 2018:

Question: If you were given $10,000 tax-free and had the ability to invest all of it in one of the following options, which would you choose?

Here are the results of the sample as a whole:

How to Invest $10K?% of Respondents
Pay down debt27.3%
Real estate13.5%
Savings account or CDs12.2%
401(k) or Roth IRA9.9%
Stock market7.2%
Child's education6.9%
Small business6.2%
Virtual currency5.1%
Education3.2%
Other/Unsure8.5%

Note: We’ve made slight adjustments to the original answers, combining one low-performing category (P2P loans) into the “Other” category

Paying down debt (27.3%) was by far the most popular response. It’s also interesting to see that many people would opt to put the $10k towards their own small business, education, or even digital currencies like Bitcoin, Ethereum, or Litecoin.

Now, here’s the same data grouped together by generations:

How to Invest $10K?Millenials (18-34)Gen X (35-54)Boomers (55+)
Pay down debt22.4%25.3%33.1%
Real estate15.1%14.6%11.2%
Education9.9%1.1%0.3%
Virtual currency9.2%4.0%3.1%
401(k) or Roth IRA8.5%9.4%11.5%
Other/Unsure8.1%8.6%8.7%
Savings account or CDs7.7%10.8%17.1%
Stock market6.6%8.1%6.7%
Child's education6.3%11.3%2.8%
Small business6.3%6.7%5.6%

Interestingly, certain answers had the same popularity across the board for all generations.

All groups were equally interested in investing in their small businesses. The highest response here came from Gen X at 6.7%, but Millennials and Gen X weren’t far off at 6.3% and 5.6% respectively.

In addition, investing in the stock market was pretty consistent as well, with Millennials at 6.6%, Generation X at 8.1%, and Boomers at 6.7%. All these groups were mostly interested in doing this through a human financial advisor, though Gen X gave robo-advisors a higher rate of consideration (20%) than other generations (11% Millennials, 4% Boomers)

Generational Differences

Some generational differences are as to be expected. For instance, barely any Baby Boomers (0.3%) wanted to put $10,000 towards their own education. This makes sense, since many are at or near retirement already. On the other hand, 9.9% of Millennials opted for an investment in education.

But here’s a situation that might be a bit more peculiar. One would guess that with student debt being at $1.5 trillion in the United States, many Millennials would opt to pay down debt with their $10,000 check. Interestingly, fewer Millennials (22.4%) chose to pay down debt than either Gen X (25.3%) or Boomers (33.1%).

On the same token, Millennials were more likely to choose either real estate (15.1%) or cryptocurrency (9.2%) as an investment. For contrast, look at Boomers, a group that had 11.2% choose real estate and only 3.1% choose crypto.

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Technology

Just 20 Stocks Have Driven S&P 500 Returns So Far in 2023

From Apple to NVIDIA, megacap stocks are fueling S&P 500 returns. The majority of these firms are also investing heavily in AI.

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Just 20 Stocks Have Driven Most of S&P 500 Returns

Just 20 firms—mainly AI-related stocks—are propping up the S&P 500 and driving it into positive territory, signaling growing risk in the market.

The above graphic from Truman Du shows which stocks are making up the vast majority of S&P 500 returns amid AI market euphoria and broader market headwinds.

Big Tech Stock Rally

Tech and AI stocks have soared as ChatGPT became a household name in 2023.

The below table shows data from last month, highlighting that just a small collection of companies drove most of the action on the U.S. benchmark index.

Company RankNameContribution to S&P 500 ReturnAverage Weight
1Apple1.49%6.61%
2Microsoft1.15%5.72%
3NVIDIA 1.00%1.62%
4Meta0.66%1.15%
5Amazon0.51%2.56%
6Tesla0.50%1.39%
7Alphabet (Class A Shares)0.34%1.72%
8Alphabet (Class C Shares)0.31%1.53%
9Salesforce0.19%0.51%
10Advanced Micro Devices0.16%0.39%
11General Electric0.10%0.28%
12Visa0.10%1.08%
13Broadcom0.09%0.73%
14Intel0.09%0.35%
15Walt Disney0.08%0.55%
16Booking Holdings0.07%0.28%
17Exxon Mobil0.06%1.37%
18Netflix0.06%0.44%
19Oracle0.06%0.40%
20Adobe0.06%0.49%
Top 20 Companies7.05%29.17%
S&P 500*7.55%100.00%

*Based on the Vanguard S&P 500 ETF as of April 11, 2023. Source: Vanguard S&P500 ETF, Bloomberg.

Microsoft invested $10 billion into OpenAI, the creators of ChatGPT. It has also integrated generative AI into its search engine Bing. This large language model is designed specifically to make search capabilities faster, generate text, and perform other automations.

Also of interest is NVIDIA, which is the most valuable chipmaker in America. It sells $10,000 chips called A100s that allow machine learning models to run. These models perform multiple tasks simultaneously to develop neural networks and train AI systems, including OpenAI’s ChatGPT. Companies that are developing AI-related services, such as chatbots or image generation, may use up to thousands of these chips.

Despite being the world’s most valuable company and a key driver of returns, Apple is an outlier among tech giants with no major projects announced in AI (so far).

Implications of Market Divergence

The problem with the strong gains seen in a few select AI-related stocks is that it clouds wider stock market performance.

Without the AI-led rally, the S&P 500 would be returning -1.4%. as of May 17, 2023.

This form of steep divergence, known as market breadth, often signals higher risk in the market.

When more companies experience positive returns it is less risky than a small handful seeing the majority of the gains. Today market breadth is very narrow, and these companies make up over 29% of the entire index’s market capitalization.

How long AI-related firms mask the broader performance of the S&P 500 remains to be seen. A growing number of market pressures, from higher interest rates to banking uncertainty could add further challenges.

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