The 5 Faces of Gen Y Investors

Younger generation invests like parents and grandparents, according to MFS Investing Sentiment Survey

Generation Y investors are conservative investors and invest more like their Baby Boomer parents, despite their long-term time horizon, according to the MFS Investing Sentiment Survey.

"Gen Y is investing more like their parents and grandparents, many of whom grew up in the shadow of the Great Depression,” William Finnegan, senior managing director of U.S. retail marketing for MFS, said in a statement. “Similarly, many Gen Y's reached investing age during the 'dot-com' bust, lived through 2008's Great Recession and continue to experience significant economic uncertainty and market volatility today.”

The survey identified several attributes about Gen Y that are cause for concern, especially as this group ages and takes on additional expenses and life goals.

1) Lack of risk orientation

  • 40% of Gen Y agreed with the statement "I will never feel comfortable investing in the stock market.”
  • Gen Y investors agreed that they are likely to feel overwhelmed by all the choices they have (54%), put off investment decisions (47%), and consider themselves to be savers more than investors (59%).
  • 30% of Gen Y said that their primary investment objective was protecting principal/not losing money, only marginally smaller than those who said their primary goal was growing assets, at 34%.
  • Gen Y has allocated more money to cash than other age groups, at 30% on average—nearly as much as they have allocated to U.S. stocks/stock funds (33%).

2) Worried about debt, retirement; spending increasing

  • 38% of Gen Y investors say they live paycheck to paycheck and that saving consistently is not an option.
  • Gen Y investors were more likely than others to have increased spending on both discretionary (42%) and nondiscretionary (49%) expenses over the past 12 months and add debt as well (36%).
  • 41% agreed that they were concerned about the amount of credit card debt their households carry.
  • 54% of Gen Y agreed with the statement, "I'm more concerned than ever about being able to retire when I thought," and 44% agreed with the statement "I have lowered my expectations about the quality of my life in retirement."

"We've identified significant red flags,” Finnegan added. “However, Gen Y has exhibited certain positive attributes that, over time, may help them transition to a less conservative approach.

3) Optimistic and engaged

  • 64% and 78% are optimistic about the economy and their own five-year future, respectively.
  • Gen Y is more likely than Boomers to say they are very knowledgeable/expert investors, 39%.
  • 62% of Gen Y agreed that they enjoy investing.

4) Open to advice

  • Of those who reviewed or rebalanced in the past 12 months, 89% of Gen Y, more than any other age group, reported an advisor playing a key role.
  • 69% reported at least consulting with an advisor regarding investment decisions, more than other age group.
  • 59% of Gen Y investors have received investment advice in the past 12 months.
  • 42% report an increased need for investment advice in the past 12 months.

5) Evidence of a disciplined approach

  • 71% report they are disciplined about putting aside money for saving and investing.
  • 52% report an increase in savings outside of retirement accounts over the past 12 months.
  • 58% agreed with the statement, "Since the downturn, I prefer to pay with cash or debit cards as much as possible."
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