Network News

X My Profile
View More Activity

Millennials and the stock market

Nancy Cook reports that young people -- my people -- are staying out of the stock market. In fact, according to a new report from Merrill Lynch, "affluent millennials and 30-somethings say their tolerance for risky investments is much lower than it was a year ago, rivaled only by people over the age of 65." In other words, the people who should have the highest risk tolerance are now matching the people who should have the lowest risk tolerance.

It's not hard to see why. As Cook says, we're a generation "whose financial coming-of-age has been bookended by the dotcom bubble and the subprime-mortgage meltdown." And I'm no exception: I manage what money I have extremely conservatively, though I'd attribute that at least as much to my profession, which forces me to read and consider every scenario for economic meltdown, as to my age.

Still, I was talking about this with an economist recently and he said something that stuck with me. "If people like you aren't in the market," he mused, "that probably means the market is underpriced, and now is exactly the time to get in."

By Ezra Klein  |  September 8, 2010; 2:34 PM ET
 
Save & Share:  Send E-mail   Facebook   Twitter   Digg   Yahoo Buzz   Del.icio.us   StumbleUpon   Technorati   Google Buzz   Previous: Why did Barack Obama do health care first?
Next: RIP post-partisanship

Comments

""If people like you aren't in the market," he mused, "that probably means the market is underpriced, and now is exactly the time to get in.""

Which is why I, as a man in my mid-20's, am 75% in the market.

Posted by: mezcalero | September 8, 2010 2:47 PM | Report abuse

Golly gee, Ezra, is that what he said? Mindlessly pump the stock market much? You write a lot of interesting posts, why ruin your blog with this CNBC worthy garbage? Whats wrong with you today? From spinning obviously for financial oligarchs to simplistically pumping the stock market you are acting like a total hack.

Posted by: mrnegative | September 8, 2010 3:10 PM | Report abuse

I was never a fan of the financial markets, but reading Micheal Lewis' "The Big Short" pushed me over the edge. if I could pull my company-funded 401K out of the markets, I would.

I'm young (30). And I want nothing to do with a dysfunctional system systematically designed to reward people for screwing their customers.

Posted by: RedBirdie | September 8, 2010 3:10 PM | Report abuse

The market has been the greatest source of wealth accumulation for people of earlier generations. Whether that can remain true is a question. And whether this administration can make good on its threats to raid small investors for money to redistribute will determine the near term fate of the market. As a young person thinking of investing, you should hope for a republican takeover of the House, at least. The market has fared badly under complete democratic control of all branches.

Posted by: truck1 | September 8, 2010 3:12 PM | Report abuse

Something like the richest 10% owns 85% of the stock market and the richest 1% owns 50% of the market. Those are old numbers, and admittedly, they could be different now.

The point is, prices are determined by a few very rich movers and shakers. All people like Ezra can do is grab on to their coattails. Even en masse, I doubt the millennials would affect prices all that much.

This is not an argument for or against investing in the market, but I do think its save to say the claims of the market being "undervalued" because of lack of millennial participation is greatly exaggerated.

Posted by: Nylund154 | September 8, 2010 3:22 PM | Report abuse

"Whether that can remain true is a question. And whether this administration can make good on its threats to raid small investors for money to redistribute will determine the near term fate of the market."

The market is up over 30% since Obama's inauguration.

Would you be interested in buying a bridge in Brooklyn? Sturdy one she is :)

Posted by: mezcalero | September 8, 2010 3:22 PM | Report abuse

"Whether that can remain true is a question. And whether this administration can make good on its threats to raid small investors for money to redistribute will determine the near term fate of the market."... "The market has fared badly under complete democratic control of all branches."

The market is up over 30% since Obama's inauguration.

Would you be interested in buying a bridge in Brooklyn? Sturdy one she is :)

Posted by: mezcalero | September 8, 2010 3:25 PM | Report abuse

To base an investment philosophy on a single factor is absurd. What about the much greater investment in the market that the generation that is approaching retirement has? What is going to happen as they withdraw? Patience people.

Posted by: staticvars | September 8, 2010 4:59 PM | Report abuse

Don't forget the DJIA posted a net loss of 20% over Bush's two terms. And for 6 of those 8 years, Republicans controlled both houses of Congress as well.

Posted by: tl_houston | September 8, 2010 5:25 PM | Report abuse

The young don't really "need" stocks, as they can simply increase their savings, and keep it all in safe investments, in addition to modifying their dreams about what their lifestyles will be like (which I think most have done in the past 2 years).

Posted by: donhalljobs | September 8, 2010 6:09 PM | Report abuse

"Don't forget the DJIA posted a net loss of 20% over Bush's two terms. And for 6 of those 8 years, Republicans controlled both houses of Congress as well."

"The market is up over 30% since Obama's inauguration."

Silly rabbit -- we don't need facts!!

Posted by: AZProgressive | September 8, 2010 6:16 PM | Report abuse

The only reason I have a 401K is for the matching funds. I was burned as a kid when I "wisely" invested in the markets at the height of the tech bubble (thanks for the sound financial advice, dad).

I think the idea that the market is underpriced because young people are staying out is ludicrous. We live in an unprecedented time of market saturation due to 401Ks and investment accounts.

(note: typos are because commenting on the iPhone sucks. A lot. )

Posted by: punditpending | September 8, 2010 6:17 PM | Report abuse

Which is why I'm 50 and I'm still keeping the bulk of my investments in index funds. The market is down. That's when you buy.

Posted by: pj_camp | September 8, 2010 8:38 PM | Report abuse

Ezra, I think all of us would be interested hearing more about your portfolio. I don't think size is all that important, but a broad description of asset allocation would be instructive and a great conversation starter.

Posted by: Klug | September 8, 2010 10:25 PM | Report abuse

Another fun idea is to do what Ezra is doing, and just wait for the next crash before you buy. The US market is not going to go up fast anytime soon.

Posted by: staticvars | September 8, 2010 11:33 PM | Report abuse

economists would normally say if you see a ten dollar bill on the ground, dont pick it up, because if it were really a ten dollar bill, someone else would have already..

Posted by: rjs0 | September 9, 2010 5:45 AM | Report abuse

AZ "progressive" and others: you never mention 9/11 or the tech bubble when discussing the market on Bush's watch. There was a nice recovery from 9/11. In the first three months of the Obama administration the market sank to the level it was at when it first reopened after 9/11, and this on no particular dramatic event -- just his administration. We'll see how it does under this administration only when (or if) it ends.

Posted by: truck1 | September 9, 2010 8:57 AM | Report abuse

Given that millenials will be buying in for nearly half a century, why on Earth do they care about vol over 5-10-15 year periods? Why do they think buy and hold money should be placed in bond/money market funds earning next to nothing?

Someone who invested consistently from 1906-1946 would have done just fine despite the Panic of 1907, the Great Depression and two World Wars.

These dips are good for young investors - don't worry about your existing balance being worth less, you aren't selling now. Stocks were on sale. If there is another dip in 2015, great, another sale. In 2022, awesome, yet another sale. Much better than a steadily rising market, as a given contribution buys more shares. All you need is a decent bull market sometime before 2045-2050 for it to have paid off.

Granted, bull markets aren't guaranteed, but an environment in which there are no rallies globally for 50 years is probably also a tough one for the allegedly safe assets such as government bonds.

Posted by: justin84 | September 9, 2010 9:53 AM | Report abuse

Post a Comment

We encourage users to analyze, comment on and even challenge washingtonpost.com's articles, blogs, reviews and multimedia features.

User reviews and comments that include profanity or personal attacks or other inappropriate comments or material will be removed from the site. Additionally, entries that are unsigned or contain "signatures" by someone other than the actual author will be removed. Finally, we will take steps to block users who violate any of our posting standards, terms of use or privacy policies or any other policies governing this site. Please review the full rules governing commentaries and discussions.




characters remaining

 
 
RSS Feed
Subscribe to The Post

© 2010 The Washington Post Company