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.
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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.