A fascinating effect of the gut-wrenching market gyrations during the 2000’s has been the apparent loss of the Millennials or Generation Y as an investor class. Millennials include those who were born in the 80’s and 90’s. Their perception of risk and reward in the stock market is dominated by the experiences. These include the bursting of the tech bubble, 9/11, and the 2008-09 financial crisis.
Now that this youngest group of adults are working age and are beginning to make investment decisions, evidence shows that they are disproportionally risk averse. According to a recent report published by UBS, millennials only have an average of 28% of their investment portfolios allocated to stocks. Further, more than half of their portfolios are sitting in cash! With such a conservative allocation, they are likely missing a great opportunity to get an early jump on building their retirement nest egg.
In a recent article, Patrick O’Shaughnessy explains the long-term consequences of being too risk averse in the early in stages of an investors’ effort to build wealth. He also offers some compelling insights for why they may want to consider taking more risks with their portfolios.
You can link to the article here: http://patrickoshag.tumblr.com/post/92630628579/an-investing-primer-for-millennials