Equity Allocation Among Young Adults

ABSTRACT This study explores equity allocation among US households by analyzing two datasets from the Federal Reserve Board and a third dataset from a retirement plan service company in the United States. Results indicate that objective financial knowledge is associated with increased equity allocations among older adults but decreased equity allocations among younger adults. Results from several analyses indicate that young adults tend to have retirement portfolios that are under‐allocated to equities. Young adults are also more likely to report feeling uncomfortable making investment decisions. We find evidence that target date funds can help reduce the likelihood of being under‐allocated to equities. Overall, the results indicate that there are opportunities for financial planners and other financial service professionals to help improve investment decision making among young adults.