The stock market has seen some major downturns in the past 10 years - the decade when Gen Y began considering investment options for the first time. It's no surprise that, as a generation, this age group has been reluctant to start investing. In fact, according to the Investment Company Institute, investors born in the seventies and later are less likely to own any equities than their parents or grandparents did at the same age. There is a fundamental difference in how different generations see investing, and it may have long-lasting impacts.

SEE: The Generation Gap

Generation Why?
Adam Koos, a Certified Financial Planner (CFP) and president of Libertas Wealth Management, sees generational differences play out in his office every day. He falls into the Gen X age group, himself, and sees a big difference in where he started out and where Gen Y and later generations start out. Immediately following college, he had less than $20,000 in student debt, while he has successful Gen Y clients who have more than twice that amount. He calls the age group "Gen Why?" because "Why would we invest?" They're young and too busy paying off college loans.

While many Gen Y members do have investments, they're likely to be through defined contribution plans, such as 401(k)s. Vanguard reports that participants in such plans have minimal engagement with them: once a participant has enrolled, he or she rarely modifies any allocations or investment strategies until a life event forces a change.

In contrast, Koos' Baby Boomer clientele is far more interested in their investments. Their attitudes are very focused on providing for retirement or even augmenting their current incomes from employment. Koos says, "They're playing catch-up, whether it be because they're divorced, didn't save enough money or borrowed too much against their Home Equity Lines of Credit (for home improvement, cars, vacations and college costs for their kids). As a result, they're having a hard time finding a job that pays what they're used to, once they're laid off by their employer, who's figured out they can hire a new, highly trained, tech-savvy college grad, for a fraction of the cost." It's created a situation for many of these investors where they feel the need to be more conservative with their investments, but can only get what they need by being aggressive.

Both Gen X and Baby Boomers have seen booms, with industries like real estate and technology growing rapidly. They've seen that taking some risks with an investment strategy can pay off. Their investment attitudes are balanced by that fact, as well as how investments have performed over the past few years.

However, Koos does have one client group that seems to have found comfortable approaches to investing - those who grew up during the Great Depression, also known as the Silent Generation. Koos describes his older clients' investment attitude: "They withdraw a small chunk of change from their portfolios each month (if I can get them to do so), with the intention of spending it ... only to come back in for their next appointment with a bigger check than last time, from all the money they saved from their social security, pension and investment income."

The Bottom Line
These attitudes are bound to change over time: most members of Generation Y are thinking about paying down college loans right now. Marriage and parenthood are the big milestones in their lives. Retirement is decades off, making investing for it a low priority. The big question is just what direction Gen Y will take when investing becomes more of a priority. Will this age group be willing to take risks in a stock market that hasn't yet offered good returns since they graduated high school? It's possible that investors in the Gen Y age group will be very conservative, compared to past generations - maybe even too conservative for their own good.

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