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Millennials cautious with investing

(Russ Ball/Albuquerque Journal)

(Russ Ball/Albuquerque Journal)

ALBUQUERQUE, N.M. — When it comes to financial chaos, the generation born after 1980, known to demographers as Millennials, has seen it all.

They saw the Internet stock bubble burst in 2000, knocking 78 percent off the Nasdaq index. They lived through the recessions of 2001 and 2007. Worst of all, they survived the financial panic and housing market collapse of 2008.

That could explain why, according to surveys, the Millennials are more conservative investors than their parents.


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MFS Investment Management, for one, found that despite their youth and, therefore, the very long time they have to build their wealth and weather market turmoil, 40 percent of Millennials see five years as investing for the long term, and 25 percent say their primary investment goal is to preserve principal.

MFS, a global asset management firm based in Boston, reported last month that Millennials keep 26 percent of their portfolios in cash and 31 percent in domestic equities, according to its MFS Investing Sentiment Insights survey.

People 68 years old and older, who are at an age when they need to think about capital preservation and liquidity as retirement years approach, keep 20 percent in cash and 41 percent in domestic equities.

Millennials interviewed for this story don’t see themselves as being especially conservative or frightened of the markets. They say they are realists. Experience has shown them the financial system is unreliable and, in their view, no one in Washington is doing much to change that.

They came of age when credit was easier to get than a good first date, and they saw the wreckage debt could make of someone’s life. They strive to avoid it and spend cautiously.

As for Social Security and Medicare, forget about it. Millennials who spoke with the Journal expect the older generations to suck those programs dry long before they are ready to retire.

“When the financial crisis hit, I saw my parents lose half of their retirement savings,” said Anne Elizabeth Illanes Meyers, a 26-year-old law clerk for New Mexico Supreme Court Chief Justice Petra Maes. “They were in a place where retirement was an option and things were looking good.”

Meyers’ parents had to postpone retirement and reassess their finances.


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“I don’t want to have the feeling of the rug being pulled out from under my feet after I spent so many years working hard and building up a financial cushion,” she said.

Connor Payne, 29, a vice president with insurance agency Brown & Brown of New Mexico, thinks another big financial blowup is “inevitable.”

“I think the way, socially, the country is trending, I think the markets are going to continue to be as volatile as they have been. I don’t see stability coming from the country, from within, from within the people. I don’t see the confidence there. I don’t see it from the top down, either,” he said.

“There is not a lot of confidence, personally and as a whole for our generation. Social Security is a figment of our imagination. That is something that will never be tangible for us.”

Elizabeth Pittman, 32, lives in Canadian, Texas, a prosperous oil- and gas-producing town northeast of Amarillo. The housing-market crisis and financial panic missed her area for the most part.

Her mother, Laura Hall, is chief trading and operations officer with REDW Stanley Financial Advisors LLC in Albuquerque. Hall taught her to think long term, to save and invest, and to ride out the inevitable storms that roil markets.

“In the long haul, it will be OK,” said Pittman, who is a customer services representative for a small community bank.

Even so, Pittman said her investments contradict conventional wisdom. Instead of investing aggressively for growth while young, then moving to more conservative holdings over time, Pittman and her husband “are going to be conservative from the time we start to the time we retire,” she said.

As for Meyers, she once thought risky stocks with the potential for good gains was the way to make money.

“I’m young, I have plenty of time,” she said. “Now I am more reluctant to invest in anything that seems risky. I don’t want to invest in anything that I know has the potential to disappear, for me to lose it all.”

That conservatism extends to debt and spending.

“We don’t want any more debt than we already have,” she said. “We are trying very hard to get rid of the payments we do have. It’s a personal decision. We don’t have to have a brand-new car and the newest iPad.”

Meyers shudders at the thought of debt, but she is not even two years out of law school and has to borrow to get herself set up.

“On the one hand, it’s a necessary evil,” she said. “On the other hand, what I’ve observed in the past decade or so and what I’ve learned is that it’s extremely crucial not to let loans and debt consume you.”

Laura Hall thinks this kind of self-awareness is essential to creating a good investment strategy.

Hall believes the panic of 2008 and the market collapse of 2009 were freak occurrences, but that doesn’t mean history won’t repeat itself. Investors have to understand how that awful time made them feel and how they will feel should it happen again.

“It surprises me how much clients and I talk about how they feel about their portfolios … I’m a great believer that you have to have a balance between growth and income in your portfolio,” she said, noting that the balance point depends on your risk tolerance and how you feel.

But you should understand, too, how your risk tolerance will affect your long-term prospects, Hall said. If you can’t stand losing money, you have to accept that your portfolio will grow more slowly than one invested at higher risk and the funds you think you’ll need in the future may not be there.