REPOST: Millennials Are Doing a Better Job Investing for Retirement Than They Get Credit For

Conventional perception about the Generation Y being poor at money management is gradually losing traction. As published on Money, millennials are in fact making wise moves about their retirement, with a growing number of them turning into savvy investors. Read more:

The accepted narrative when it comes to millennials and investing is that they just don't get it. They're too likely to hunker down in cash, too scared of stocks, and just too conservative for their own good.

But recent research, including a new report based on how millennials actually invest their money for retirement, suggests the conventional wisdom is wrong.

The Myth

You don't have to look too hard to find evidence that supports the notion that millennials are wary about the stock market. When millennials were asked by researchers about the best way to invest money they wouldn't need for 10 years or more, stocks ranked a distant fourth behind real estate, cash, and gold, according to a recent Bankrate.com survey.

Other surveys have shown a similar tendency on the part of millennials to gravitate toward less volatile investments like cash while avoiding stocks.

According to BlackRock's 2017 Annual Global Investor Pulse Survey, young investors estimated that they held 65% of their investment portfolio in cash on average, while a Legg Mason Global Asset Management survey earlier this year reported that millennials had just 15% of their investment holdings equities. That's in large part because of "the long shadow of the 2008 global financial crisis, with memories still acute despite the markets' ongoing recovery."

Translation: Young investors are still so freaked out by the near-60% drop in stock prices between the market's October 2007 high and its March 2009 low that they're afraid to wade into what they see as the treacherous waters of the stock market.

The Reality

But two recent reports based on hard data — examining how investors' money is actually invested as opposed to the estimates people give to survey takers — tell a very different story.

For example, a report from the Employee Benefit Research Institute released earlier this month that looks at how more than 26 million 401(k) participants of different ages divvy up their savings among a variety of investments shows that the stock exposure of different age groups is pretty much what you'd expect.

The allocation to stocks is lowest for people in their 60s (55% on average) and then rises steadily as you go down the age ladder, with the percentage in equities topping out with people in their 20s and 30s, who have roughly 80% of their 401(k) savings in stocks.

One could argue, I suppose, that people just starting out in their careers who are investing for a retirement that's a good 30 to 40 years away should devote an even larger percentage of their 401(k) stash to stocks. Indeed, some target-date retirement funds designed for people in their 20s and 30s allocate upwards of 90% or more of their assets to equities.

Continue reading HERE.

"The opinions expressed in this re-posted article are not necessarily the views of LOM, but are presented to provide a broad spectrum on financial matters."