Markets
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:
Country | Primary Investing Goal | Percentage |
---|---|---|
Canada | Saving for retirement | 78% |
USA | Saving for retirement | 71% |
UK | Saving for retirement | 71% |
Hong Kong | Saving for retirement | 48% |
Germany | Saving for retirement | 40% |
France | Saving for retirement | 27% |
UAE | Saving to start a business | 31% |
China | Beneficiaries / estate planning | 42% |
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 Agreeance | Lowest agreeance |
---|---|---|
Retire comfortably | Boomers | Millennials |
Make sure money is safe | Boomers | Millennials |
Preserve as much wealth as possible | Boomers | Millennials |
Pass on wealth to my heirs and others | Millennials | Gen Xers |
Ensure I have funds to pay for important events | Millennials | Boomers |
Invest at the lowest cost possible | Boomers | Gen Xers |
Have the best advice possible and am willing to pay | Millennials | Boomers |
Retire early | Gen Xers | Boomers |
Not miss out on market opportunities | Gen Xers | Boomers |
Choose riskier investments to build wealth fast | Millennials | Boomers |
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.
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?
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. Â
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 Caps | Mid Caps | Large 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.Â
Higher Volatility
However, higher historical returns of small- and mid-cap stocks came with increased risk. They both endured greater volatility than large caps.Â
Small Caps | Mid Caps | Large Caps | |
---|---|---|---|
Total Volatility | 18.9% | 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.Â
Small Caps/Large Caps | Mid Caps/Large Caps | |
---|---|---|
Relative Forward P/E Ratios | 0.71 | 0.75 |
Discount | 29% | 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.
Explore more insights from New York Life Investments
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