Younger Investors Not Shy About Stocks in 401(k)s

English: Risk and Return for Investors
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This is a great indicator of the importance equities have in the overall health of any economy and young Americans recognize it. Most baby boom and earlier investors have an all in mentality when dealing with equities. Their thought process must become controlling risk and know what their expected return and expected volatility are. This will reduce their anxiety with stocks.

About 21 percent of savers in their sixties had more than 80 percent of their accounts invested in stocks last year compared with about 40 percent of investors in 2000, Holden said. “We see a tempering of the allocation to stock The process must include our older participants,” she said.

No Equities

Separate studies by ICI have shown that U.S. households are less willing to take on financial risk in the wake of the financial crisis in 2008, said Holden. Concern that younger individuals may be timid about buying stocks hasn’t been borne out by the data on 401(k) participants, she said.

The Standard & Poor’s 500 Index (SPX) gained about 826 percent over the 30-year-period from Dec. 31, 1980, to the end of 2010.

The number of younger workers without equities in their 401(k) accounts also decreased at year-end 2010 to 9.4 percent from 14.6 percent in 2000, said Jack VanDerhei, research director at EBRI.

“A lot of that may not necessarily be due to employees themselves actively making that choice as much as it’s them being automatically enrolled, being put in target-date funds,” VanDerhei said.

The ‘Great Recession‘ may have changed the younger generation into investors rather than speculators like the baby boomers. By following three simple rules, own equities, globally diversify and rebalance investors will succeed in reaching their long term financial goals.

Please comment or call to discuss how this will affect your company retirement plan.

  • Why Gen Y Still Invests In Stocks (huffingtonpost.com)
  • Younger investors save more for retirement (401kplanadvisors.com)
  • Study: Boomers Making More 401(k) Investing Mistakes Than Younger Folks (401kplanadvisors.com)
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