Millennial millionaires plan to sell stocks in 2022. Here’s why

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Majority of millennial millionaires (55%) say they are planning to sell stocks in 2022 because of possible tax changes, according to recent data CNBC’s Millionaire Survey.

Ninety percent of millennial millionaires say they anticipate taking some action on their finances in the next year due to possible tax changes, according to the survey, which polls investors with investable assets of $1 million or more, excluding primary funds. residential areas.

That’s very different from the older generation millionaires surveyed in the poll. Meanwhile, 54% of Generation X millionaires said they plan to make a change, while only 29% and 38% of baby boomers and World War II millennials said they did. know they have corresponding plans.

According to the survey, Millennials are also more likely than older millionaires to say they will change their plans to buy a property (35%), sell a property (26%) or give it as a gift or make a donation. large (23%) for tax reasons. Only about a quarter (23%) also indicated they might sell other asset classes besides stocks and real estate as part of a tax plan.

While President Joe Biden’s Better Back Building Act envisages significant changes to the tax code, the House version passed in November. withdraw some tax moves with major impacts on personal finances. Democrats were then unable to pass the bill in the Senate before the end of the year. Tax changes to help cut the annual deficit or cover the costs of new programs could be back on the table next year, but Legislative outlook remains uncertain in 2022.

Concentration of millennium wealth

Blair duQuesnay, investment advisor at Ritholtz Wealth Management, says part of the difference in outlook between the generations could be down to how they achieved millionaire status and their ability to invest heavily in one area. there.

“A lot of millennial millionaires have a concentrated position in corporate stock,” says DuQuesnay. “It could be the companies they work for that are still private so maybe they’re just starting to get liquid; the other path that’s popular with the younger generation is crypto… of the millennial generation who simply put it all in Tesla and just held and held and held.”

Those who follow these strategies are likely to be successful in 2021.

There has been a record increase in market launches this year in the US, with 416 IPOs raising about $156 billion and capital to private firms continues to flow and support higher valuations.

Eighty-three percent of millennial millionaires say they own crypto, with more than half (53%) have at least 50% of their assets in crypto.

Elon Musk faces his own challenges investing deeply in Tesla, and tax challenges, as a result. sold a total of $9.85 billion in Tesla shares in November.

“Maybe they’re a little older now; maybe they realize they want to do different things with those benefits, so they’re considering changes,” duQuesnay said. “I really think it’s not necessarily taking the risk of millions of millennials, but simply a feature of how they make their wealth.”

For older generations, they’re more likely to already have a more balanced portfolio and won’t need any kind of change if they don’t want to, duQuesnay said.

“If you compare the typical millennial millionaire portfolio to the typical baby boomer millionaire, for the most part, baby boomers have saved, invested, and diversified their portfolios,” she said. me”. “They’re not necessarily changing, but really just continuing the plan they’ve made.”

On the other hand, many millennial millionaires are now structuring their financial plans after leaving equity firms or after working at a currently listed startup.

“It’s a recurring topic that I’ve been hearing talking about with people lately,” duQuesnay said.

Stock market profit and loss

Today, taxable loss selling as a personal financial planning strategy is also touted more as a value-added service, especially through investment platforms that have become popular with investors. Young investors like robot advisors include Wealthfront and Betterment.

“People perceive it at a younger age,” says Mitch Goldberg of investment consulting firm ClientFirst Strategy.

In addition, many younger investors have been brought into the market through the commission-free trading structure that has now become the norm throughout the brokerage industry and this makes buying and selling stocks a decision. determination easier.

Both of these trading technology developments come at a time when many younger investors are also caught up in the stock meme craze and pandemic. Even with the S&P 500 up nearly 30% this year, losses in individual stocks are still very likely, and many investors who have just won big in 2020 have been hit hard, Goldberg said. this year.

“DoorDash, Zoom, AMC, GameStop, and a lot of other very popular stocks that excited investors have turned into losses,” he said. He said: “The shares of Zillow, Stich Fix, Teladoc, DocuSign… that increased in price due to the pandemic situation were wiped out.

This contrasts with older investors, such as boomers, who don’t understand the stock meme phenomenon and stick to more conservative stocks they know well, such as Apple and Microsoft. , and that has paid off for them this year and as a result, investors are even less likely to sell even if their valuations are sky-high.

Forecasting upcoming changes

Catherine McBreen, chief executive officer of Spectrem Group, which conducted the survey for CNBC, says that for millennial millionaires, “they’re very aggressive in their investment intentions, but they’re also very smart. bright.”

In fact, the survey found millennial millionaires were more likely to support long-term capital gains taxation as ordinary income as well as creating a 2% annual tax rate on assets in excess of 50 million dollars shows that they can find a way to take advantage of not having her say a tax has to be paid before it’s done.

The survey also showed mixed opinions about the degree of inflation risk to the US economy in the coming year. No millennial millionaire says it’s a risk, while startups claim it’s the biggest risk. Millennial millionaires say coronavirus is the biggest risk, followed by higher taxes and the US stock market.

“Millennials are smart enough to understand [inflation], but they’ve never experienced it,” McBreen said. Older generations are becoming much more cautious about the incoming wave of inflation, while younger investors are more focused on taxes and markets. “


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