Growing up during America’s “lost decade” (2000 – 2010) has certainly taken a toll on Generation Y in the United States. This generation lived through the collapse of the tech bubble in 2000 and the financial catastrophe of 2008, that is causing massive economic problems on a global scale until today. One of the outcomes of this continuing crisis, is that Generation Y doesn’t trust the stock market: forty percent of Gen Yers — 18- to 30-year-olds — say they will “never feel comfortable investing in the stock market,” according to a study from MFS Investment Management. Generation Y investors are conservative investors and invest more like their Baby Boomer parents, despite their long-term time horizon, according to the MFS Investing Sentiment Survey.
Below, you can find some of the results MFS has categorized into two groups: the red flagged results can be seen as a threat to the investment climate, the positive signs can be seen as chance for the market: they give direction to the view that GenY is not a lost generation regarding investments on the stock market.
Red Flag: Lack of risk orientation
- 40% of Gen Y agreed with the statement “I will never feel comfortable investing in the stock market.”
- Gen Y investors agreed that they are likely to feel overwhelmed by all the choices they have (54%), put off investment decisions (47%), and consider themselves to be savers more than investors (59%).
- 30% of Gen Y said that their primary investment objective was protecting principal/not losing money, only marginally smaller than those who said their primary goal was growing assets, at 34%.
- Gen Y has allocated more money to cash than other age groups, at 30% on average — nearly as much as they have allocated to U.S. stocks/stock funds (33%).
Red flag: Worried about debt, retirement; spending increasing
- 38% of Gen Y investors say they live paycheck to paycheck and that saving consistently is not an option.
- Gen Y investors were more likely than others to have increased spending on both discretionary (42%) and nondiscretionary (49%) expenses over the past 12 months and add debt as well (36%).
- 41% agreed that they were concerned about the amount of credit card debt their households carry.
- 54% of Gen Y agreed with the statement, “I’m more concerned than ever about being able to retire when I thought,” and 44% agreed with the statement “I have lowered my expectations about the quality of my life in retirement.”
Positive sign: Optimistic and engaged
- 64% and 78% are optimistic about the economy and their own five-year future, respectively.
- Gen Y is more likely than Boomers to say they are very knowledgeable/expert investors, 39%.
- 62% of Gen Y agreed that they enjoy investing.
Positive sign: Open to advice
- Of those who reviewed or rebalanced in the past 12 months, 89% of Gen Y, more than any other age group, reported an advisor playing a key role.
- 69% reported at least consulting with an advisor regarding investment decisions, more than other age group.
- 59% of Gen Y investors have received investment advice in the past 12 months, and 42% report an increased need for investment advice in the past 12 months.
Positive sign: Evidence of a disciplined approach
- 71% report they are disciplined about putting aside money for saving and investing.
- 52% report an increase in savings outside of retirement accounts over the past 12 months.
- 58% agreed with the statement, “Since the downturn, I prefer to pay with cash or debit cards as much as possible.”
Some challenges and opportunities signalled there. But, and this may feel a bit contradictory, Generation Y’ers are heavily invested in stocks, due to a law made in 2006 by the George W. Bush administration. A column at the online WSJ, points out, that the kids will be allright. Click here to go more in-depth and confused about this topic. Stay here if you’re comfortable with the facts&figures we’ve published above. 🙂