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May 19, 2011 at 10:40 AM
The recession hasn't dented young investors' use of equities, it seems. A report released Thursday by Vanguard found the average equity allocation of defined-contribution plan participants in their 20s rose to 84.7% in 2010 from a low of 40.7% in 2003.
Young investors' apparent predilection to equities was "more profound" among the youngest investors, Vanguard found, but was shared by investors younger than 30.
John Ameriks, co-author of the report, said in a statement that the financial crisis has not led to a "lost generation" of investors in 401(k) plans and other defined-contribution plans. "In fact, we found that many younger people hold balanced investments in their plans that include a healthy portion of stocks,” he said.
At play in young investors' high equity allocations, according to the report, is automatic enrollment in retirement plans and the shift away from conservative defaults to more balanced options like target-date funds. These factors affect young participants more than their older counterparts because many employers offer automatic enrollment for new hires only.
