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.

Related Articles
  1. Professionals

    How to Sell Mutual Funds to Your Clients

    Learn about the various talking points you should cover when discussing mutual funds with clients and how explaining their benefits can help you close the sale.
  2. Professionals

    Fund and ETF Strategies for Volatile Markets

    Looking for short-term fixes in reaction to market volatility? Here are a few strategies — and their downsides.
  3. Investing

    How Diversifying Can Help You Manage Market Mayhem

    The recent market volatility, while not unexpected, has certainly been hard for any investor to digest.
  4. Investing

    How to Win More by Losing Less in Today’s Markets

    The further you fall, the harder it is to climb back up. It’s a universal truth that is painfully apparent in the investing world.
  5. Personal Finance

    How To Choose A Financial Advisor

    Many advisors display similar skillsets that can make distinguishing between them difficult. The following guidelines can help you better understand their qualifications and services.
  6. Investing Basics

    Diversifying Your Portfolio: 5 Easy Steps

    You can never be sure of what the market will do at any given moment. That’s why a well-diversified portfolio is so important.
  7. Investing Basics

    Hiring a Financial Advisor? Look for the CFP Label

    Don’t skimp on the CFP designation. Here's why those three letters show that someone is qualified in financial and investment planning.
  8. Mutual Funds & ETFs

    Top 4 Investment Grade Corporate Bonds ETFs

    Discover detailed analysis and information about some of the top exchange-traded funds (ETFs) that offer exposure to the investment-grade corporate bond market.
  9. Retirement

    Should Balanced Funds Be Part Of Your Portfolio?

    Find out why you should include balanced funds in your portfolio, including the importance of customizability, diversification and professional management.
  10. Investing

    10 New Apps That Help Budget For Expensive Cities

    From platforms for saving money to those that account for side jobs, mobile apps are changing spending habits and income generation in urban areas.
  1. Can mutual funds invest in hedge funds?

    Mutual funds are legally allowed to invest in hedge funds. However, hedge funds and mutual funds have striking differences ... Read Full Answer >>
  2. When are mutual funds considered a bad investment?

    Mutual funds are considered a bad investment when investors consider certain negative factors to be important, such as high ... Read Full Answer >>
  3. What fees do financial advisors charge?

    Financial advisors who operate as fee-only planners charge a percentage, usually 1 to 2%, of a client's net assets. For a ... Read Full Answer >>
  4. What does a high turnover ratio signify for an investment fund?

    If an investment fund has a high turnover ratio, it indicates it replaces most or all of its holdings over a one-year period. ... Read Full Answer >>
  5. What is the difference between passive and active asset management?

    Asset management utilizes two main investment strategies that can be used to generate returns: active asset management and ... Read Full Answer >>
  6. What percentage of a diversified portfolio should large cap stocks comprise?

    The percentage of a diversified investment portfolio that should consist of large-cap stocks depends on an individual investor's ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Gross Profit

    A company's total revenue (equivalent to total sales) minus the cost of goods sold. Gross profit is the profit a company ...
  2. Revenue

    The amount of money that a company actually receives during a specific period, including discounts and deductions for returned ...
  3. Normal Profit

    An economic condition occurring when the difference between a firm’s total revenue and total cost is equal to zero.
  4. Operating Cost

    Expenses associated with the maintenance and administration of a business on a day-to-day basis.
  5. Cost Of Funds

    The interest rate paid by financial institutions for the funds that they deploy in their business. The cost of funds is one ...
  6. Cost Accounting

    A type of accounting process that aims to capture a company's costs of production by assessing the input costs of each step ...
Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!