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Home News USA MFS Investing Sentiment Survey Offers Insight into Generation Y Investing Behaviors


MFS Investing Sentiment Survey Offers Insight into Generation Y Investing Behaviors
added: 2011-09-08

Generation Y investors are conservative investors and invest more like their Baby Boomer parents, despite their long-term time horizon, according to the MFS Investing Sentiment Survey. The survey offers an in-depth look into the investing habits and sentiments of Generation Y, the next large wave of investors that encompasses approximately 77 million Americans between the ages of 18 and 30 with nearly $1 trillion in spending power.

"Gen Y is investing more like their parents and grandparents, many of whom grew up in the shadow of the Great Depression. Similarly, many Gen Y's reached investing age during the 'dot-com' bust, lived through 2008's Great Recession and continue to experience significant economic uncertainty and market volatility today," said William Finnegan, senior managing director of U.S. retail marketing for MFS. "Gen Y, coupled with their slightly older Gen X brethren, combine to form a group of investors today that is larger than the Baby Boomer generation, with nearly equal spending power, a demographic fact the financial services industry needs to embrace."

MFS' survey identified several attributes about Gen Y that are cause for concern, especially as this group ages and takes on additional expenses and life goals.

Red flag: Lack of risk orientation

- 40% of Gen Y agreed with the statement "I will never feel comfortable investing in the stock market.”

- Gen Y investors agreed that they are likely to feel overwhelmed by all the choices they have (54%), put off investment decisions (47%), and consider themselves to be savers more than investors (59%).

- 30% of Gen Y said that their primary investment objective was protecting principal/not losing money, only marginally smaller than those who said their primary goal was growing assets, at 34%.

- Gen Y has allocated more money to cash than other age groups, at 30% on average -- nearly as much as they have allocated to U.S. stocks/stock funds (33%).

Red flag: Worried about debt, retirement; spending increasing

- 38% of Gen Y investors say they live paycheck to paycheck and that saving consistently is not an option.

- Gen Y investors were more likely than others to have increased spending on both discretionary (42%) and nondiscretionary (49%) expenses over the past 12 months and add debt as well (36%).

- 41% agreed that they were concerned about the amount of credit card debt their households carry.

- 54% of Gen Y agreed with the statement, "I'm more concerned than ever about being able to retire when I thought," and 44% agreed with the statement "I have lowered my expectations about the quality of my life in retirement."

"We've identified significant red flags. However, Gen Y has exhibited certain positive attributes that, over time, may help them transition to a less conservative approach," added Finnegan. "Gen Y investors are engaged with advisors, take an active interest in managing their portfolios, and are generally optimistic about their own futures."

Positive sign: Optimistic and engaged

- 64% and 78% are optimistic about the economy and their own five-year future, respectively.

- Gen Y is more likely than Boomers to say they are very knowledgeable/expert investors, 39%.

- 62% of Gen Y agreed that they enjoy investing.

Positive sign: Open to advice

- Of those who reviewed or rebalanced in the past 12 months, 89% of Gen Y, more than any other age group, reported an advisor playing a key role.

- 69% reported at least consulting with an advisor regarding investment decisions, more than other age group.

- 59% of Gen Y investors have received investment advice in the past 12 months, and 42% report an increased need for investment advice in the past 12 months.

Positive sign: Evidence of a disciplined approach

- 71% report they are disciplined about putting aside money for saving and investing.

- 52% report an increase in savings outside of retirement accounts over the past 12 months.

- 58% agreed with the statement, "Since the downturn, I prefer to pay with cash or debit cards as much as possible."

"Whether wealth is transferred to Gen Y from older generations or they generate it themselves, it is a demographic imperative that the financial services industry embraces younger investors," Finnegan concluded. "We've identified challenges and opportunities for Gen Y investors that financial advisors are uniquely qualified to address. However, they are operating in a business model geared toward serving older generations. Changing how they engage younger generations and helping them transition from conservative savers to long-term investors might just be the ultimate challenge for today's financial advisors."


Source: Business Wire

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