Connect with us

Markets

How Investment Goals Vary by Country and Age

Published

on

How Investment Goals Vary by Country and Age

How Investment Goals Vary by Country and Age

It goes without saying that investors want to see their money grow.

However, it turns out that why investors want their money to grow changes considerably, depending on who you are talking to.

Investment Goals by Geography

Today’s infographic from Raconteur first shows why people invest based on country of residence.

In the following table, we’ll show selected data to illustrate an interesting contrast between North American, Asian, and European cultures:

CountryPrimary Investing GoalPercentage
CanadaSaving for retirement78%
USASaving for retirement71%
UKSaving for retirement71%
Hong KongSaving for retirement48%
GermanySaving for retirement40%
FranceSaving for retirement27%
UAESaving to start a business31%
ChinaBeneficiaries / estate planning42%

In Canada, the United States, and the United Kingdom, saving for retirement is the primary investment goal for 70% or more of all respondents. However, in Europe and Asia, there is a much wider diversity of investment goals.

In Germany and France, for example, close to a quarter of respondents mentioned that saving for an emergency was their primary goal, behind saving for retirement. Meanwhile, in the UAE and in China, the primary investment goal was not retirement – it was instead saving to start a business (UAE) and setting up family and/or beneficiaries for success (China).

Goals by Generation

It’s not just geographical boundaries, the level of economic development, and the local culture that impacts investment goals.

Another factor is generational: Baby Boomers, Gen Xers, and Millennials are at very different stages of life, and each generation has their own quirky preferences, anyway.

Statement (I want to…)Highest AgreeanceLowest agreeance
Retire comfortablyBoomersMillennials
Make sure money is safeBoomersMillennials
Preserve as much wealth as possibleBoomersMillennials
Pass on wealth to my heirs and othersMillennialsGen Xers
Ensure I have funds to pay for important eventsMillennialsBoomers
Invest at the lowest cost possibleBoomersGen Xers
Have the best advice possible and am willing to payMillennialsBoomers
Retire earlyGen XersBoomers
Not miss out on market opportunitiesGen XersBoomers
Choose riskier investments to build wealth fastMillennialsBoomers

Not surprisingly, as people get older, their goals shift away from making immediate big-ticket purchases, and holding riskier investments for a higher rate of return. Later on in life, goals are more focused on retirement and maximizing wealth.

That said, there are some anomalies in the above data that are interesting.

For example, Millennials – not Baby Boomers – are most concerned about building wealth to pass onto their heirs. Finally, it is the Millennials that are willing to pay the most for investment advice, in order to get the best possible result.

Click for Comments

Markets

Beyond Big Names: The Case for Small- and Mid-Cap Stocks

Small- and mid-cap stocks have historically outperformed large caps. What are the opportunities and risks to consider?

Published

on

A line chart showing the historical return performance of small-, mid-, and large-cap stocks.

 

Published

on

The following content is sponsored by New York Life Investments
An infographic comparing low-, mid-, and large-cap stocks, including an area graph showing historical returns, a bubble chart showing how much $100 would be worth over 35 years, a horizontal bar graph showing annualized volatility, and a line graph showing relative forward price-to-earnings ratios, that together show that mid-cap stocks present a compelling investment opportunity.

Beyond Big Names: The Case for Small- and Mid-Cap Stocks

Over the last 35 years, small- and mid-cap stocks have outperformed large caps, making them an attractive choice for investors.

According to data from Yahoo Finance, from February 1989 to February 2024, large-cap stocks returned +1,664% versus +2,062% for small caps and +3,176% for mid caps.  

This graphic, sponsored by New York Life Investments, explores their return potential along with the risks to consider.

Higher Historical Returns

If you made a $100 investment in baskets of small-, mid-, and large-cap stocks in February 1989, what would each grouping be worth today?

Small CapsMid CapsLarge Caps
Starting value (February 1989)$100$100$100
Ending value (February 2024)$2,162$3,276$1,764

Source: Yahoo Finance (2024). Small caps, mid caps, and large caps are represented by the S&P 600, S&P 400, and S&P 500 respectively.

Mid caps delivered the strongest performance since 1989, generating 86% more than large caps.

This superior historical track record is likely the result of the unique position mid-cap companies find themselves in. Mid-cap firms have generally successfully navigated early stage growth and are typically well-funded relative to small caps. And yet they are more dynamic and nimble than large-cap companies, allowing them to respond quicker to the market cycle.

Small caps also outperformed over this timeframe. They earned 23% more than large caps. 

Higher Volatility

However, higher historical returns of small- and mid-cap stocks came with increased risk. They both endured greater volatility than large caps. 

Small CapsMid CapsLarge Caps
Total Volatility18.9%17.4%14.8%

Source: Yahoo Finance (2024). Small caps, mid caps, and large caps are represented by the S&P 600, S&P 400, and S&P 500 respectively.

Small-cap companies are typically earlier in their life cycle and tend to have thinner financial cushions to withstand periods of loss relative to large caps. As a result, they are usually the most volatile group followed by mid caps. Large-cap companies, as more mature and established players, exhibit the most stability in their stock prices.

Investing in small caps and mid caps requires a higher risk tolerance to withstand their price swings. For investors with longer time horizons who are capable of enduring higher risk, current market pricing strengthens the case for stocks of smaller companies.

Attractive Valuations

Large-cap stocks have historically high valuations, with their forward price-to-earnings ratio (P/E ratio) trading above their 10-year average, according to analysis conducted by FactSet.

Conversely, the forward P/E ratios of small- and mid-cap stocks seem to be presenting a compelling entry point. 

Small Caps/Large CapsMid Caps/Large Caps
Relative Forward P/E Ratios0.710.75
Discount29%25%

Source: Yardeni Research (2024). Small caps, mid caps, and large caps are represented by the S&P 600, S&P 400, and S&P 500 respectively.

Looking at both groups’ relative forward P/E ratios (small-cap P/E ratio divided by large-cap P/E ratio, and mid-cap P/E ratio divided by large-cap P/E ratio), small and mid caps are trading at their steepest discounts versus large caps since the early 2000s.

Discovering Small- and Mid-Cap Stocks

Growth-oriented investors looking to add equity exposure could consider incorporating small and mid caps into their portfolios.

With superior historical returns and relatively attractive valuations, small- and mid-cap stocks present a compelling opportunity for investors capable of tolerating greater volatility.

Visual Capitalist Logo

Explore more insights from New York Life Investments

Click for Comments

You may also like

Subscribe

Continue Reading

Subscribe

Popular