Ten years after the financial crisis hit, it is still having a major psychological impact on investors.
According to a new survey from Legg Mason Global Asset Management, millennial investors in the United States report that the financial crisis and subsequent great recession strongly influence their investment decisions, leaving them more risk-averse than any other age group.
“Who thought millennial investors, most of whom were too young to be actively engaged in the markets at the time, would turn out to be the unwitting victims of the financial crisis?” Tom Hoops, executive vice president and head of business development at Legg Mason, said in a statement. “The pain their parents and grandparents experienced left an indelible impression that is only now manifesting itself as they begin to engage with the markets. They are not emulating previous generations in their investment behavior.”
The survey finds that 82% of the surveyed millennials said their investment decisions are influenced by the financial crisis, with 57% saying they are “strongly influenced.”
By comparison, 39% of Gen X, 13% of baby boomers, and 14% over age 65 said their investment decisions are still “strongly influenced” by the tumultuous global financial events that began in 2007 and ended in 2009.
A similar number of millennial investors said they are conservative investors (85%), with 52% calling themselves “very conservative.” Only 30% of Gen X, 29% of baby boomers, and 28% over age 65 consider themselves “very conservative.”
According to Hoops, this conservative approach — if it keeps them away from stocks and bonds entirely — could have “perilous implications” for their ability to save and benefit from market growth for retirement.
“Millennials have one great advantage over all other investors: their youth,” Hoops said in a statement. “History shows again and again that growth investing works over the long term. If they avoid potential growth opportunities like equities, they are letting their greatest advantage slip through their hands.”
The survey does show that millennials maybe becoming more comfortable with risk after the sustained bull market.
According to the survey, 78% of the surveyed millennial investors said this year they plan to take on more risk — with 45% saying “much more risk.” About 66% say they are interested in investing in equities. Meanwhile, just 27% of Gen-X investors plan to take on “much more risk.”