It is natural for someone who shares an interest with their friends or family to want to know what relevant choices they make – whether that is the outfits they bought, the paperbacks on their bookshelf, or even the records in their music collection. The same applies to investments and where people have put their money.
We all have different tastes and preferences, but there is a burning curiosity to see what others are doing.
It does not mean someone else has made better investment decisions as everyone’s risk appetites, time horizons and goals are different. Yet certain people often take comfort in knowing they are going down the same path as others. Equally, some individuals might be happy to be different to the crowd.
To serve the natural curiosity on how others invest, we now examine trends among AJ Bell customers’ ISAs and pensions, based on three distinct age groups. We have looked at the most popular holdings, based on number of customers holding each stock, fund or bond.
Group 1: 18- to 34-year-olds
There is a high chance this age group is when people are either dipping their toes into investing, or they are just getting into the groove and starting to shape their portfolio with confidence.
It is very much a period where people are in the initial stages of building up wealth. Certain people might have their eye on funding their first home or paying for their wedding; others might be laying the foundations for a nice nest egg in later life.
Interestingly, there was similarity between the most popular investment choices among AJ Bell customers in both ISAs and SIPPs (self-invested personal pensions). Exposure to the US stock market through an S&P 500 tracker fund was the top choice for both account types.
Investors might take the view that age is on their side; they have time to ride the ups and downs of the stock market, and it is potentially worth backing faster-growing companies in the hope of achieving larger returns.
The US is home to fast-growing companies in the technology space as well as big household brands and giants of industry. Fast growth is at the heart of Scottish Mortgage Investment Trust which also features heavily among ISAs and pensions of the 18- to 34-year-old age group, as does Fundsmith Equity which has stakes in a broad range of big companies.
On the stock side, semiconductor group Nvidia, engineer Rolls-Royce and electric vehicle maker Tesla feature heavily.
Certain investors want to keep it simple and own a tracker fund with exposure to companies around the world.
What is particularly interesting is the omnipresence of gold for this age group. Even though growth is clearly important to them, so is having a safety blanket and that might explain why gold-related funds feature heavily. Gold is a popular portfolio choice during times of uncertainty, and a strong period for the metal over the past year might explain why AJ Bell investors widely hold it.
Group 2: 35- to 55-year-olds
Someone in their late thirties to early fifties could be enjoying solid career progression and have greater capacity to squirrel money away. Contributions could be increasing each year into their ISA or pension, and they might be more comfortable with looking for individual company shares.
There are more shares among the most popular holdings of AJ Bell customers in their age group than the 18-to-34-year bracket. Names such as Nvidia and Tesla remain key holdings, but the sit beside generous dividend payers. These include Legal & General, BP and Lloyds.
People’s investment goals might have switched to extending their home, paying for children’s education, and retirement saving could be a higher priority, particularly for those in their forties or above. That potentially explains the mixture of growth and income-style names in the most popular holdings list.
While the upper end of the list is stock-heavy, there are still people who favour funds. Some might hold them exclusively; others might hold them alongside shares or even bonds.
Tracker funds providing exposure to gold and silver are popular, as are vehicles seeking to match the returns from the US, UK, and global stock markets. Interestingly, a global government bond fund is a big hit in customers’ ISAs, showing that investors have embraced portfolio diversification.
Group 3: 56-year-olds and above
It is only natural to see income come to the fore as people wind down their working life and move into retirement. After all, we still have bills to pay, and something needs to replace the monthly paycheck once a career has ended.
Investors often select shares based on trust and familiarity in the brand, backing companies that have been around for decades. Legal & General, Lloyds, GSK, and National Grid are among the key names in AJ Bell ISAs and SIPPs for those 56 years old and above. On the funds and trusts side, big companies paying big dividends is also on the menu via City of London Investment Trust and JPMorgan Global Growth & Income.
There is dividend sustenance in these portfolios, but that does not mean investors do not want dessert as well.
Against the dominance of dividend-paying investments is a sprinkling of potentially sweeter-tasting growth-oriented funds and stocks.
For example, Polar Capital Global Technology is popular, perhaps as investors acknowledge increases in life expectancy and the resulting risk of their retirement pot running out without some growth.
Dan Coatsworth: Head of Markets
Dan Coatsworth is AJ Bell's Head of Markets. Dan has been with the company since December 2012 and has more than 18 years' experience in the industry, following the markets and all things investing. He...
