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Young investors wary of stock market
A worried investor.
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Tess Vigeland: Don't look now, but the Dow slipped below 10,000 again this week. It's enough to bring on flashbacks to the four-digit days of March '09. The difference this time around, though, there aren't nearly as many investors to care about it. The Investment Company Institute found we have withdrawn more than $33 billion from the stock market mutual funds this year. For older people who don't have as long until retirement that makes sense. But what does it mean for young investors who are decades away from their golden years.
Marketplace's Stacey Vanek Smith has our story.
Stacey Vanek Smith: Gen X and Gen Y investors may not have gotten stung by the stock market crash the way their boomer parents did, and they still have lots of time to build their retirement savings back up. But all the same, they're feeling a little gun shy.
Twenty-five-year-old social worker Alison Reilly just opened a retirement account. She says, she doesn't want to put her money in the stock market.
Alison Reilly: Everything seems a little uncertain to be putting my money in a risky place.
All that risk aversion has younger investors behaving like their parents, says Alicia Munnell, director of the Center for Retirement Research at Boston College.
Alicia Munnell: My view is that it's just scary out there and I think that's what most people think.
Munnell says young investors are pulling money out of stocks, which are risky, but tend to generate bigger returns and putting it into bonds -- safer, but with a smaller pay-off. Last month, investors pulled roughly $14.5 billion out of stock market mutual funds.
But playing it safe can be dangerous, says Stuart Ritter, a financial planner with T. Rowe Price. He says the stock market is still the place where investors get the most for their money.
Stuart Ritter: Stocks historically have been the asset class that provide the greatest potential gain. Your biggest risk of not being able to buy the things you want to buy in retirement is not what the stock market does in the next two or three years. It's how vastly prices are going to increase over the next several decades. So equities are appropriate to handle that.
Ritter says if young investors don't put money into stocks, they'd better be prepared to save a lot more for retirement.
Ritter: If you decide, well, I'm not going to be in the stock market, even if you have a very long time horizon. That's certainly a choice, but now you've got to make up for that by saving more of your own money.
Which you may have to do in any case. Retirement expert Alicia Munnell says young investors should count on putting more money aside for retirement than their parents did.
Munnell: I think during the 90s, we got lulled into the notion of thinking that planning for retirement was pretty cheap. You put in small contributions and you earn 10, 15, 20 percent on your money and you could get a big pile. And I think what's happened here is that we've suddenly realized that saving for retirement is going to be really expensive.
Especially given what's happening now. Munnell says the bad economy's pushed interest rates so low, it's very hard to protect yourself and get a decent return. Twenty-five-year-old Alison Reilly tried to avoid the stock market, but found it was just too costly.
Reilly: I had a CD, but recently mine came up for renewal and they only offered like 1.4 and that was so pathetic. So it's, you know, back to the stock market, I guess.
T. Rowe Price's Stuart Ritter says there is a middle ground -- put a little more money in CDs, bonds and other fail-safes. You will have to save more, but you may also be able to sleep a little better at night.
In Los Angeles, I'm Stacey Vanek Smith for Marketplace Money.
I was one of the young adults that suffered pathetic returns over the last 10 years. I feel for the koolaid that stocks are a pretty sure bet to return 10% a year - yeah right. I've pretty much now come to the conclusion that the stock market is a scam. Heck it doesn't even really represent "ownership" since the stock performance isn't really tide to the performance of a company but only what people "think" it is doing. It's much smarter for 99% of working people to invest in more sure thing vehicles such as vanilla bonds as with stocks you are just as likely to lose as win. So i'm sure walstreet is worried that people like me are no longer buying their marketing gimmick, but that ship has sailed. Better find another sucker to fool.
Ricky, the link you are looking for is in the next article from this weekend's Marketplace Money.
I mean to lead to this:
Any time a group of people or an era seems to not get that they have to fold into a means of advancement that was so highly regarded in the past--
is it possible that there is a wisdom of the numbers which is evolving another value system? Maybe post-Katrina, post-Haiti, post-9/11 we are growing in our estimation and investment in human capital--in the sense of loving and committed care and action.
Gotta say: How many people I met during an incident with my parent in the hospital and rehab; and many others not 'earning top dollar'.
If this article is true-what on Earth is their hope for retirement?
'Course, another thing I've noticed is the asset ameliorization of loving family. My experience is that family members that are so overbooked with commitments to a job and extra business, that they do not come through for family, the parent can be in limbo, the other sibs overburdened. But, by golly, they are going to be financially wise.
Compare that to a family where the sibs all get the drill, pull together, show up, cheerfully contribute time and attention, have a positive attitude (don't mean 'chin up') that makes their sacrifice go more smoothly and happily, and find happy times in the gathering and in pooling their emo resources to love,laugh, hold and hug. The elder heals faster and better, is more independant and more present to continue as a supporting cheerleader at least, and everyone gets the benefit of holding the water level so the whole family floats.
I know sibs who do not get how precious time is to everyone. These are the ones who think they musn't waste a drop of their financial (or time)blood, every man for himself.
I ask if this is a microcosm of our greater 'society'? (In some ways I am embarrassed to call what we have that!)
If people are content to buy stocks to see to their OWN futures, if we concur that a decent retirement is impossible without that--are we then in shared recognition that there are a whole lot of people in our midsts, maybe people working in the eldercare and healing industries, maybe mowing your lawns or grooming your cat, or wiping down the counter where your organic (and I am a proponent of organic--for all, and on all land!) strawberries are sitting--people who, well, then, by these terms, have not got a prayer.
