Gen X and Y's Investing Confidence May not be Justified

MFS found the younger generations are somewhat more optimistic in their approach to investing, but there is concern over Gen X/Y's ability to save enough to meet long term goals.

The MFS Investment Management Investing Sentiment Survey found 42% of Gen X/Y investors reported they increased the amount they contributed to their IRAs/401(k)s in last 12 months; MFS’ 2010 Client Confidence Survey showed only 30% of Gen X/Y reported a net increase to tax-deferred retirement accounts since 2008’s economic downturn. In addition, 51% say they increased the amount saved in non-retirement accounts, a greater percentage than older generations.   

More than one-third (36%) of Gen X/Y investors report a net increase in willingness to take on increased risk, more than any other age cohort. More than half (55%) of Gen X/Y investors agree that an effective portfolio should always include a sizeable portion of international investments, more than Boomers (40%) or those aged 65+ (36%).   

Forty-seven percent of Gen X/Y disagreed with the statement “I will never feel comfortable investing in the stock market,” an improvement in sentiment over MFS’ 2010 survey, which showed that 39% disagreed with a similar statement.  

However, despite a median 23 years until retirement, 61% of Gen X/Y reported being more concerned than ever about being able to retire when they thought they would. Forty-five percent of Gen X/Y agree that they are overwhelmed by all the different investment choices available.   

Forty-two percent say their need for financial advice has increased in the past year – far more than Boomers or investors aged 65+.   

The survey also found Gen X/Y investors on average had a lower percentage of their portfolios in equities (34%) than older generations (Boomers, 36%; 65+, 38%). Gen X/Y reported on average a higher percentage of their portfolio in cash (30%) than older generations. Twenty-two percent of Gen X/Y report their top investing goal is protecting principal/not losing money. Seventy-one percent of Gen X/Y report inflation as a primary concern, but have 30% of their portfolios in cash.

MFS sponsored the survey from February 7-14, 2011, of 596 individual investors with $100k+ in household investable assets and 610 licensed financial advisers (either FINRA or SEC) who have been licensed for at least three years with at least $500,000 or more in annual mutual fund sales. All investor respondents make or share in making financial decisions for their households. Gen X/Y refers to those respondents under age 46. Boomers refer to those 46 to 64 years old. Seniors or older generations refer to those 65 or older.