Most millennials maintain appropriate allocations to equities given their age and financial goals, according to a research paper published Tuesday by Vanguard.
Researchers found that the typical millennial investor allocates 90% of his or her portfolio to equities, which it said was consistent with certain professional portfolio allocations.
Vanguard’s Center for Investor Research assessed household risk-taking by analyzing 4 million Vanguard retail investor households holding a combination of IRA and taxable brokerage or mutual fund accounts.
The research also found that like other generations, millennials have been adopting balanced investing strategies.
During the 2012–2017 period, investors of all ages shifted away from extreme equity allocations — from 38% with all equities or zero equities to 33%, Among millennials, the share of investors with extreme allocations dropped from 45% to 38%.
This change could be attributed in part to increased use of target date funds, according to Vanguard. Among IRA holders in the sample, about one-third of all millennials owned TDFs.
Vanguard says its 2018 defined contribution benchmarking report complements these findings on the increasing use of TDFs: 82% of plan participants younger than 25 allocated their portfolio to TDFs, while 67% of those between 25 and 34 were invested in these funds.
“Target date funds are reshaping investor behavior of millennial and Gen X investors, with the potential to improve outcomes over an investing lifetime,” the paper’s author Jean Young said in a statement.