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Millennials expect the highest investment returns of any generation, study finds

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Even with the economic downturn caused by the coronavirus pandemic, millennials are still the most optimistic of any age group about the investment returns they expect in the coming years, a survey has found. 

Millennials anticipate an annual total return of nearly 12% on average from their entire investment portfolio over the next five years.  

This was the finding of Schroders' 2020 global investor study, an online survey which it commissioned, polling 23,450 investors around the world between April and June. It categorized millennials as those aged 18 to 37-years-old.

The survey, published last week, found this was the highest expectation of any age group. 

This is despite the fact that as a result of pandemic-fueled volatility, the S&P 500 index, for example, is up just 4.5% year-to-date and the U.K.'s FTSE 100 is down nearly 17% in that time. Meanwhile, bonds have offered flat or negative yields. 

In fact, the older the age group, the slightly less optimistic investors became. Generation X, those aged 38 to 50-years-old, predicted they could generate nearly 11% annually from their investments, while baby boomers (aged 51-70) expected nearly a 10% gain on their money each year. The silent generation (aged 71 and over) believed their funds could grow by close to 10% annually.  

Millennial investors' optimism remained pretty much unchanged from last year, as did that of Generation X and the silent generation. Baby boomers actually expected their average annual return to go up this year, having hoped for a 9% yearly gain on their money in the 2019 study. 

Rupert Rucker, head of income solutions at Schroders, said that much of millennials' investment experience has been "shaped from the period of very strong market performance since the global financial crisis, which might have distorted long-term return expectations." 

He pointed out that millennials likely have the capacity to take more risk than older generations, given they are further away from retirement, and so may expect higher investment returns in order to "compensate for the additional risk." 

Rucker added that the consistency of the findings over the last few years could also be illustrating that younger investors are generally more optimistic than older cohorts "irrespective of market conditions." 

Millennials in Argentina seemed to be the most hopeful about what investment returns they could get in the coming years, expecting an annual return of more than 15%. Millennials in the U.S., UAE, Indonesia and India also believed they could see around a 15% gain on their savings. 

Rucker said this could be influenced by investors' political outlook, inflation and interest rate expectations or even their country's response to the coronavirus pandemic, as well as other factors.

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