Generation Y Doesn't Trust The Stock Market, But Is Heavily Invested In Stocks

Growing up during America's "lost decade" has certainly taken a toll on Generation Y, which has lived through the tech bust in 2000 and the financial catastrophe of 2008.

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 that was reported in The Wall Street Journal on Sunday.

Yet for all that pessimism, Gen Y is heavily invested in the market, as Journal columnist Carolyn T. Geer points out. Thanks to a six-year-old law that offers companies incentives for automatically enrolling employees in 401(k) plans, the number of twenty-somethings who are investing in stocks has grown.

The law, signed by President George W. Bush in 2006, most affected workers who were newest to the workforce, often Gen Yers. According to the Investment Company Institute and Employee Benefit Research Institute, which examined the portfolios of 23 million individuals with 401(k)s, the percentage of twenty-somethings with 80 percent or more of their 401(k) funds in the stock market grew from 55.3 percent in 2000 to 60 percent in 2010.

Generation Y encompasses 77 million Americans who have combined earning power of $1 trillion, according to MFS Investment Management. Saving is currently not a priority for a large portion of Gen Yers -- 38 percent say they live from paycheck to paycheck.

Investing young, however, is key. Reuters reports:

According to data from Baltimore-based fund shop T. Rowe Price, if one saver puts away $500 a month from ages 21 to 30 and enjoys a 7 percent annual return, she will end up with almost a million bucks at age 65. That handily beats another saver who waits for that level of return until age 31 yet contributes all the way to 65, despite putting up $150,000 more than the first investor.

"Whether wealth is transferred to Gen Y from older generations or they generate it themselves, it is a demographic imperative that the financial services industry embraces younger investors," William Finnegan, senior managing director of U.S. retail marketing for MFS, stated in the MFS study.

Comments

[kds42]

04:04 PM on 02/10/2012

The MOB looks at Wall Street with great envy.

[olephart]

12:08 PM on 02/10/2012

After the market crash of 1929 Al Capone was reportedly asked if had lost money in the stock market and he replied no, I didn’t have any money in the markets those guys are a bunch of crooks.

[guveqzero]

10:44 AM on 02/10/2012

In this time of high frequency trading and unlimited speculation, you would have to be crazy to expect the market to be low risk.

[TruEngineHearing]

10:10 AM on 02/10/2012

Terrified Americans are being swindled by those pushing the grand, embarrassing myth of a 401k future. It's a total distraction from the fact that hard-right conservatives are totally committed to ending the social safety net that protects American citizens from the big, horrendous nightmare of economic fear - not seen by Americans since the Republican 1920s collapsed into the depression of the 1930s.

Today's coin-operated GOP will do nothing to stop the destruction of the middle-class; because their wealthy 1% patrons don't need it - they only need cheap labor, and whether it's in China or Kentucky is inconsequential.

[AlanBannacheck]

01:42 AM on 02/10/2012

As a member of generation Y, I expect by the time I'm able to retire, it will be mandatory euthanasia or something equally sinister.

[AlanBannacheck]

02:47 AM on 02/10/2012

besides, gold silver, land, and oil are more valuable then binary numbers!

[TruEngineHearing]

10:48 AM on 02/10/2012

...well, if we just sit there eating republican cheese, no doubt you're right. We need to grow a couple, and get out there and chase the rightie rodents off the lawn - and get back to the future.

[nwlover]

02:02 PM on 02/09/2012

It used to be "Buy and Hold" meaning stocks. Now it's buy-- and watch like a hawk. One shouldn't be in stocks unless you are willing to put in the time to learn about warning signs and act before everything goes to heck.

[Crash2Parties]

09:52 PM on 02/09/2012

nwlovel, most GenX, GenY and younger workers feel they have no choice; it's the only retirement plan offered to them and/or pushed on them by their employers.

btw, my Aussie/Kelpie from working stock is way smarter than your Lab. Unfortunately, she's also way more energetic (read: crazy) :p

[KarmaPatrol]

01:24 PM on 02/09/2012

Ride the bull but don't forget to take a little profit off the table once in awhile, especially when you are older and need that money sooner. Inflation isn't that bad where one can see how much they need between age 59 and 70. Besides, falling off a bull hurts more when you are older ...

[JStading]

11:20 AM on 02/09/2012

Do I trust individual stocks? Heck no, and post MF Global, which for some reason is the insane scandal no one is commenting on, it's unclear that your funds in your brokerage account are actually secure.  I trust (1) non-gold / non-silver ETFs and (2) index funds / Spiders.  I won't trade anything else.

If I want to do any other investment, I'll pool my money with an equity group and buy a small business.

[blood1]

10:35 AM on 02/09/2012

Not being a member of Gen Y - I remember the beginning of the 401K process. What was interesting (?) was that there was a way to not invest in stocks, via the Money Market. I was told, that stocks were the way to "get rich", but if an individual was fiscally conservative and had a decent income, then I asked my personal investment manager their opinion. They said go with cash/ money market". I didn't "get rich", but I never lost a dime. I'm retired, have a very modest pension, that also includes health and dental insurance. The point being that retirement should be a long view approach, not a get rich quick approach.

[senorlou]

09:48 AM on 02/09/2012

As a Gen X-er, we always knew the stock market was rotten.  If you work for a company, there are few other investment opportunities that don't involve the stock market (401K, money market accounts).  Many of us would LOVE to get out, but what's the alternative?

[butdoyou]

07:31 PM on 02/09/2012

Municipal Bonds. ,,,,,

[senorlou]

09:06 PM on 02/09/2012

Thanks, that's what I'm doing now. I appreciate the information.

[withonor]

09:20 AM on 02/09/2012

I think it's a mistake to say that our confidence in the stock market has to do with the two recessions we've dealt with in our lifetime. Looking at history, recessions happened about every five years or less until when we started being born in ~1980. So our parents and grandparents have double or quadruple the experience with ups and downs. And the first "recession" many of us lived through was really a matter of statistics and had little impact. So in our 21-32 years of life we've experienced one real recession, albeit the worst since the Great Depression.

I think the biggest source of our lack of confidence is actually from the information and communication age. Of course being in the worst recession since the Great Depression has something to do with it, but having access to, being able to provide, information from multiple sources in a matter of seconds changed everything.

I try to imagine having one or two sources of information who are reporting on things that are two days old or more and being able to make "educated" decisions. FDR's fireside chats were revolutionary, but you still had to go by his word. Fact checking wasn't the same then. Never-the-less, we have information available whenever we want it and the truth usually isn't hard to discover for those interested.

We're more educated now but unfortunately we are moving from an information age to a misinformation age, which is far worse than uneducated.

[earlgray1787]

09:18 AM on 02/09/2012

Wall Street’ ... Three Card Monte’ ... the trick is’ ... there is no pea under the cup’... who doesn't know that?

[withonor]

08:46 AM on 02/09/2012

The "Employment Bubble" is going to burst soon. The only reason companies are doing as well as they are is because they are reducing payroll, either through reduced work force or systematic replacement of high wage earners with lower wage earners, and higher productivity, achieved by getting rid of veterans and replacing them with people desperate to work. Both payroll reduction and productivity are reaching plateaus.

When that happens and profits start going south, all those entitled millionaires on Wall Street won't be happy and will probably have a hard time adjusting to smaller dividends and then they'll start retracting from the stock market. Those who have insider information, and maybe those who pay close attention, will pull out immediately. Everyone else will be screwed, again.

This is the real reason corporations are sitting on trillions of dollars. They are saving up for the next recession, which will be worse than what we just went through, so they can afford to operate in the red for years to try and come out on the other side.

[Elizabeth Everett]

08:31 AM on 02/09/2012

Generation Y is not “investing in the stock market” they are being saddled with a hidden Wallfare State payroll tax. You can’t call unwilling payments investments, they are a tax.

[tax evader]

11:46 AM on 02/09/2012

I liked that: "Wallfare State payroll tax." lol

[tj3usa]

07:13 AM on 02/09/2012

Unemployment among the young is at record levels. Hard to invest when you are broke and do not have extra cash to play with.

What a fraud! The financial industries have helped to break the economy and then want young people to do what? Invest? How about some actual thought here as to what is going on.

Obama and Romney or who ever the next President will be, and their political parties are not talking about anything real. Invest? How about just survive OK?