Are Millennials Afraid of Investing?

Why a Generation of Young People Are Avoiding Risk

Risk taking millennials
Young people seem fearless, so why do they fear the market?. (c) Peter Beavis, Stone, Getty Images

What movie title best describes how your age group feels about investing? Pre-retiree baby boomers (ages 55 to 64) say Easy Rider. Young people (under age 35) say Dazed and Confused. That's the finding of E*TRADE's recent findings in StreetWise, a quarterly study tracking experienced investors. The study found that pre-retirees are far more bullish about the market than young people. Although both groups are feeling more encouraged about the markets than they were last year, 72% of pre-retirees are feeling bullish, compared to 55% of millennials.

The findings are pretty surprising when you consider people usually get more conservative and worried about the markets as they near retirement. Young people, who have the benefit of time on their side, are typically more willing to accept risk.

As Financially Timid as Depression-Era Kids 

Along similar lines, the study found that young people are far less likely to recommend individual stocks. I actually agree, and think mutual funds are a more sensible approach for most amateur investors. Still, it indicates a degree of risk intolerance that is typically not found in young people. 

This is not the first study to find that millennials are conservative. In fact, a UBS Wealth Management Americas Investor Watch report found that today's twentysomethings are as fiscally conservative as the generation born during the Great Depression. It found that people age 21 to 29 have only 28% of their portfolio assets in stocks and 52% in cash.

Non-millennials do almost exactly the opposite, dedicating nearly half of their portfolios (46%) to stocks and leaving less than a quarter (23%) in cash. 

Bernie Madoff Syndrome

So why the lack of confidence in the stock market? It may have something do with market activity during the lifetimes of the millennial generation.

Many of them came of age during the tech bubble, then there was the housing bubble, followed by the devastating 2008 financial crisis. While the US stock market has rebounded from those lows, economies and markets around the globe are still struggling to recover (or not). 

The financial downturn also created a sense of mistrust in the minds of this skeptical group. I call it Bernie Madoff syndrome, the feeling that it's harder these days to trust market experts. A Merrill Lynch Private Banking & Investment Group study called Millennials and Money found that millennials think of financial advisors as salesmen who are not working in the best interests of their clients. 

Room to Explore

There are certainly many trustworthy investment advisors around, and there are also ways to self-direct your portfolio while taking into account a fear of volatility. Lena Haas, the SVP of Retirement, Investing and Saving at E*TRADE recommends a so-called core/explore approach. This is done by dividing your portfolio into two parts: the majority for core, low-cost investments that feel relatively conservative and safe; and a smaller portion dedicated to investments that are more risky and chase higher returns.


When it comes to exploring different types of investments and regions, young people also have the benefit of accessing investment options that were not available 20 or 30 years ago. There are low-cost mutual funds and exchange traded funds targeting specific sectors and regions around the world. It's easier than every for DIY types to build portfolios of investments that fit their interests and objectives, which seems like a very millennial thing to do. 

Of course, if you are not interested in exploring riskier investments, a conservative core portfolio is better than avoiding investing altogether. And, who knows, if markets stabilize and continue to deliver the types of consistent returns that we have seen over the past few years, millennials may be the next go-go investing group. 

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