Millennial Investors Overshadowed by Memories of ’08 Financial Crisis

Millennials entering the work force today share grim memories of the financial crisis that struck the globe between 2007 and 2008, when several of their adult counterparts saw their savings and investments significantly diminish. And for many Millennials, that time solidified their attitudes on investing in the market, according to a Global Investment Survey by Legg Mason Global Asset Management.

The firm found that 85% of U.S. Millennials consider themselves to be somewhat or very conservative investors. Meanwhile, two-thirds say their investment decisions are still influenced by the Great Recession despite substantial evidence of overall economic recovery. This is especially concerning considering that conventional wisdom would encourage younger people to be more aggressive with their investments, particularly in terms of retirement savings, due to their long time horizons.

Reality, however, seems to paint a different picture. Legg Mason finds that on average, Millennials hold less in stocks than their elders. Baby Boomers tend to consider themselves more risk-tolerant investors overall with 29% describing themselves as very aggressive. For Millennials, that figure stands at 7%. As for their portfolio makeup, Millennials on average hold 15% in stocks as opposed to Baby Boomers who hold on average 24%.

Taking a worldwide perspective, Legg Mason finds Millennials are “saving more like their Depression-era grandparents … despite clear evidence of a strengthening economic recovery in the developed world, the longest and strongest bull market in equities in decades – and the persistence of the bull market in bonds, despite the beginning of a let-up in monetary stimulus.”

Still, the firm reports that 65% of all American investors are still at least somewhat influenced by the Recession.

But for Millennials, it can be more than just painful memories of seeing their families struggle financially or gloomy headlines about an ongoing market crisis that’s holding them back from saving more. Today, they are also looking at record-high student loan debt. The report finds that only 42% of American Millennials consider themselves to be financially comfortable. Considering these statistics, student-loan repayment programs can be powerful tools for plan sponsors. 

And there is a silver lining. The firm finds that the typical Millennial portfolios tend to be more diversified than that of their older counterparts. They hold more money in alternative asset classes and strategies. These types of assets including real estate represent 39% of their investible assets compared to 14% for Boomers. Combined with tech-driven targeted educational programs surrounding the benefits of long-term saving, these diversified strategies can position Millennials to be better prepared for retirement and walk away from the shadow of the Financial Crisis.

More insight from Legg Mason’s Global Investor Survey can be found at leggmason.com.