Recently there has been a lot of concern in the financial media about Millennial investors shying away from stocks while hoarding cash. The common, but misunderstood, explanation for this is that young investors have low risk-tolerances because of the Great Recession (2007-2009) and will never warm up to stocks. I believe the decision for many Millennials to hold a large portion of their net-worth in cash is based on smart financial planning, not fear. My comments on this were recently quoted in an Investment News Article,
"Millennials are saving to buy homes and start businesses. What I tend to see is 100% stock in retirement accounts and 100% cash in personal accounts. This does not indicate a reduction in risk tolerance, but rather smart financial planning."
-David S. Oransky, CPA/PFS, CFP®
If you’re saving to buy a home or want to start a business in the next five years (common goals for this generation) it would be a huge mistake to put that money in the stock market. Stocks are a long-term investment and can have significant volatility in the short-term. If you put it in stocks it may not be there when you need it and you’ll have to delay your goals until the market rebounds. Savings for short-term goals should be held in short-term bond funds or FDIC-insured bank accounts.
Posted: April 15, 2014