Young Investors, More Optimistic Than You Think

Despite the poor economy, research indicates that young investors (Gen Y or Millennials) are taking a more proactive role in their finances.

One part access to new digital technologies that enable them a more DIY approach to managing their money, and one part a response to witnessing their parents’ savings vanish, it seems Gen Y knows they need to be smart about their money.

Yes, they’re a bit cynical given the poor economy, but that cynicism might work to their benefit as they move into their earning years and on into retirement. In a previous post, we discussed the predicted rise in equity investing over the next 12 to 18 months, and as the following infographic suggests young investors seem to be most willing to invest, when compared to their older peers. They also seem more optimistic about the market as a whole.

This could indicate the naiveté of youth — or perhaps they see something the older, more burned-out investors have overlooked.

Alexander Wallin, CEO of SprinkleBit, had this to say:

“Gen Y has grown up with the gift of ubiquitous information and the ability to make quick, informed decisions from the palm of their hand. This will be the key to financial prosperity for this generation – their ability to find good information and apply it. As Gordon Gekko said: ‘The most valuable commodity I know is information.’ And this is where the younger generations excel — at making connections and finding the information they need. And in investing, that’s the name of the game. I have a lot of confidence and optimism in Gen Y investors.”

So, what do you think SprinkleBit Nation? Is now the time to invest? Or are you still holding out?

Click Infographic to View Larger Version

Young Investors | Infographic | @SprinkleBit Investing Blog

 

 

Text summary:

Gen Y are more involved and want to invest, despite poor economy. Gen Y (or Millennials) represent the population of young people born between 1981 and 2000.

Size of Gen Y: Roughly 76 Million
12% larger than Boomer generation

Gen Y is taking their money into their own hands. A survey by Scottrade discovered that young people are more likely than older people to invest on their own — a reflection of the independent mindset to which many Millennials subscribe. More than any other generation, Gen Y is comfortable making investment decisions on their own.

Gen Y: 51%
Boomers: 37%
Seniors: 32%

Gen Y use more sources for financial information than other generations, including: websites, blogs, newspapers, TV, magazines, radio, friends, family, and peers.

“Younger generations are more informed, cynical and inclined to do research and vetting on their own.” – Larry Barret, Financial-Planning.com

Turn to friends, relatives, and colleagues to stay informed about news and events shaping the economy and financial markets:

Gen Y: 60%
Boomers: 43%
Seniors: 31%

Baby Boomers and Gen X are pulling out at retirement. According to the CDC, it is estimated that by 2030, one out of five people will be over 65. At this age, older investors will be pulling out to cover their living expenses, health care, etc. Older generations will transition from wealth accumulators to wealth distributors. This leaves a bigger piece of the pie to Gen Y.

In 2004, the percentage of the population over 65 was 12.4% – in 2030 that number will increase to 19.7%

Even though Gen Y is fast developing into the next generation of dominant investors — and the wealthiest generation in the history of the world — firms do not seem to be targeting them very aggressively. Investors aged 25-45 make up 21% of the investing market.

Optimism about investments:

Under 45: More optimistic
Over 45: Less optimistic

Expectation of portfolio gain in 2012:

Gen Y: 85%
Gen X (primarily in 30s): 75%

“Now is the best time to invest.”

Under 45: 33% agree
Baby Boomers: 12% agree
Seniors: 8% agree

And the optimism is growing. Though they may display general cynicism towards the economy due to the recession, Gen Y and Gen X are ready to take their investments head-on and a growing number of them expect to be rewarded for it.

Expectation of investment gains:

2009 – 2010: Less than 50%
2011 – 2012: More than 50%

Why so optimistic? According to Dan Schawbel, Managing Partner of Millennial Branding, “They have their whole lives ahead of them … they are saving more, managing their money, and are savvy investors because they have access to a whole online network of experts.

Sources:

TD Ameritrade’s Annual Investor Index Survey Series, 2011

Advisors Must Get on the Gen X, Gen Y Bandwagon

Where will the next big bull market come from?

Population Projections, United States, 2004 – 2030, by state, age and sex, on CDC WONDER On-line Database, September 2005.

Why Younger Investors Are So Optimistic