Financial Crisis ‘Cast Long Shadow on Investors’: UBS

Over three-quarters (76%) view the multiple global issues affecting that markets as a challenge to their understanding of the broader financial picture. Even more, 81%, say global terrorism is part of the “new normal”; 80% worry about the results of the 2016 U.S. presidential election; and 76% are concerned about the size of the country’s debt load.

While wealthy investors keep an average of about 20% of their investable assets in cash, more than half believe having “too much” cash is unwise. Many say they are likely to invest a quarter of their cash when they find the right investment opportunity, and fewer than 15% say they would advise the next generation to maintain a large cash allocation. 

Nonetheless, almost nine out of 10, 89%, have kept or boosted their cash holdings since the financial crisis, and some 40% think investors can never hold “too much” cash. “Seven years after the financial crisis and the bull market that followed, only 33% see market declines as opportunities to invest,” explained UBS. 

Millennial Madness

The UBS investor poll found that millennials seem more likely to regret their sales of investments during market declines than other demographic groups: 52% vs. 23% of Gen X and 14% of Baby Boomers. They also wished they had invested more during periods of financial recovery periods: 68% vs. 52% of Gen X and 44% of Baby Boomers.

“Millennials are arguably more conflicted than other generations when it comes to how they view investing,” explained Sameer Aurora, head of client strategy for UBS Wealth Management Americas, in a press release. “Almost half say they would take on more risk now, but they’re holding twice as much cash as Baby Boomers. Also, Millennials are unhappiest with how their portfolios are positioned, but they are the least likely to do anything about it.”

Millennials seemed to have learned different lessons from the financial crisis than investors of other generations. Only one-third of millennials now conclude that “buy and hold” investing is important vs. 57% of wealthy Swing/World War II investors.

In addition, 27% of millennials say market timing is “the most valuable lesson they learned,” says UBS, vs. 10% of Baby Boomers.

The recent poll of investors also reveals that many millennials, 43%, are willing to take on more risk since 2008—double the level of Gen Xers, 21%, more than three times that of Baby Boomers, 12%, and nearly five times more than Swing/WWII, 9%.

But, on the other hand, when asked about cash, millennials hold the most of this asset class: 41% vs. 28% for Gen Xers, 20% for Baby Boomers and 19% for the Swing/WWII generations.

Millennials, however, are the least happy with how they have positioned their portfolios: 15% vs.32% of Gen Xers, 50% of Baby Boomers and 56% of the Swing/WWII generations.

— Check out 5 Reasons Not to Panic Over the Markets on ThinkAdvisor.