Volatility Discourages Young Investors From Buying Stocks ...

Young investors, scarred by the recession, have developed a mistrust of the stock market.

Young investors, who came of age in the worst economic downturn since the Great Depression, have become wary of stocks ? even more so than members of the baby boomer and older generations, according to the most recent Millionaire Corner research.

In times of market uncertainty and volatility, 28 percent of investors ages 40 and younger would seek the safe haven of gold, according to a Millionaire Corner survey of 1,325 investors conducted in June.? The response seems downright conservative compared to that of investors in their 50s and 60s. Just 11 percent of 50-something and 8 percent of 60-something investors would buy gold as a strategy for volatility and uncertainty.

Traditionally, younger investors express more optimism about their finances than do older investors. Accompanying this confidence is an increased willingness to accept risk. Extreme market volatility appears to have tempered the traits typical of young investors. What?s their second-most common response to volatility and uncertainty? Next to buying gold, young investors are most likely to keep their money in money market mutual funds (27 percent) or products insured by the Federal Deposit Insurance Corp. (16 percent). These cash accounts represent relatively conservative and safe investment products.

In contrast, Investors in the 50s and 60s are most likely to invest in dividend stocks in times of volatility and uncertainty. The strategy is favored by more than 29 percent of investors in their 50s and 38 percent of investors in their 60s. ?

A recent Investing Sentiment Survey from MFS Investment Management found that 37 percent of Gen Y investors and 29 percent of Gen X investors agreed with the statement, ?I will never feel comfortable investing in the stock market.? In comparison, 26 percent of baby boomer investors feel the same way.

?Because they are turned off by equities and are anxious, younger investors are sitting on lots of cash,? William Finnegan, senior managing director of global retail marketing for MFS, said in a recent Investment News article. ?You'd think that with their longer time horizon and concern about inflation, younger investors would naturally gravitate to stocks. But that's not the case. Unlike Baby Boomers who rode into their adult years on a bull market in equities, younger investors have seen only booms and busts in the stock market.?

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Source: http://www.millionairecorner.com/article/volatility-discourages-young-investors-buying-stocks

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