Millennials Dumping Stocks: Why Now’s The Time To Do Just The Opposite
Mike Zaccardi, CFA, CMT | Sep 25, 2022 02:26AM ET
- An August poll showed that nearly half of millennials surveyed claimed to have sold investments over the past year
- Other age groups largely kept with their portfolio plan
- With a big stock market drop in 2022, it’s likely an ideal time to beef up investment contributions
- Inflation
- Geopolitical turmoil
- Disruptive technologies
- Interest rate hikes
Investing strategy is most important when times get tough. This year’s big stock market decline, the truly right for you. Take heart! You are not alone if you feel a bit of anxiety about your money.
Last month, Ally Financial (NYSE:ALLY) conducted a survey with some surprising results regarding my fellow millennials and what they have been doing with their investments. According to data gathered in August, a whopping 49% of millennials claimed to have sold investments in the preceding year. Compare that to just 21% of Gen X and even lower percentages for the youngsters in Gen Z and seasoned baby boomers.
h2 Survey Says: Millennials Selling Out/h2Source: Ally Invest
It’s my hope that millennials, the oldest of whom are pushing 40, were selling securities for the right reasons. What might those be? Paying for life events such as buying a first home, covering costly daycare bills, or perhaps helping out aging parents who might not have enough saved.
What would be unfortunate is seeing folks in their 20s and 30s capitulate due to market volatility, recession risks, or just seeing all that red on their investment account landing page. Also, while the pandemic was tough, splurge-spending using cash from selling what were supposed to be long-term investments is not a great strategy to reach financial freedom sooner rather than later.
Get The News You Want
The key point here is that panicking during a bear market is no way to properly manage your investments. Young investors must recognize that owning stocks for the long haul means accepting inevitable bear markets and high volatility.
As the poetic quip goes, “the tide rises, and the tide falls.” The same goes for the world of investing. There are easy-breezy bull markets and grueling bear markets. Financial writer Morgan Housel often says volatility is like a fee worth paying, not a fine worth avoiding. While it is hard to do in real-time, ignore the volatility and focus on your long-term portfolio plan.
If you’re like me, you as a millennial have potentially decades before you will tap your investments. That means not only must you endure volatility, but you can also embrace it! After all, when bear markets come about, we can buy shares on the cheap. According to Keith Lerner, buying the S&P 500 after a 20% drop from a record high has historically resulted in a solid 29% total holding period return over the ensuing three years. That means we are likely better served buying during 2022 rather than selling.
h2 The Bottom Line/h2This year tests all investors’ mettle. Steep declines in the stock and bond markets with prolonged volatility make the bull market of late 2020 and 2021 seem like ages ago. Now’s the time to take advantage of attractive valuations even though more pain might take place in the near term. Sticking with a strategy of periodically buying into stocks will prove to be a smart move.
Disclosure: Mike Zaccardi does not own any of the securities mentioned in this article.
***
The current market makes it harder than ever to make the right decisions. Think about the challenges:
To handle them, you need good data, effective tools to sort through the data, and insights into what it all means. You need to take emotion out of investing and focus on the fundamentals.
For that, there’s InvestingPro+, with all the professional data and tools you need to make better investing decisions. Learn More »
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.