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Generation Y Surprises: Millennial Investors Reacted With More Equities

October 19th, 2009 by 
PK

Ready for a Generation Y surprise?  From U.S. News and World Report comes this report (using a Scottrade study) about the attitudes of Millennial Investors mid (post?) recession.  Yes, instead of running scared from ticker symbols to the safety of buried backyard treasure, Generation Y is taking the recession in stride- even increasing their investments despite the plunge.

What Did You Expect from Millennial Investors?

Fundamentally, the results make sense.  My generation isn't dumb (although many would say we are way too entitled).  Understanding that recessions and market drops are often the best time to invest, the youngest workers in the work force stand to benefit the most, due to a long time horizon, from investing during a recession.  Although I recently warned that long time horizons don't guarantee success, recessions level the playing field and make it a bit more likely success is in the cards.

Being young has its own advantages and risks.  Youth means that with many working years ahead of us, mistakes we make now (investing or otherwise) can be overcome.  We have risk in other forms, for example in Social Security.  From the oft-cited Harvard study of 2005, 70% of youth don't believe Social Security benefits will be paid out to them, and 63% don't believe benefits will be paid to their parents.  Not encouraging numbers.  Generation Y is smart enough to know that if Social Security doesn't pay out, they'll need another way to pay for retirement.

Selection Bias

The problem with the study?  It concentrates on Generation Y investors. Their attitudes on investing are obviously different than other member of Generation Y (and the population in general).  In fact, they are already investing, so without polling them it would be possible to guess they have more risk tolerance.  The rest of Generation Y?  This study doesn't help us know.  Some may have been scared away from investing because of the recession, and others may be so risk adverse they would avoid investing anyway.  Still others are finishing up their formal schooling and have yet to decide.  The study is certainly interesting, but it should be taken with a grain of salt.

So what do you think?  Is the study accurate?  Do you know any Millennial investors?  Are you one?  Let me know your thoughts in the comments sectioning Attitudes!

Don't Quit Your Day Job...

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