Markets Losses Rock GenX Investor Confidence

June 10, 2003 ( - The gap between financial objectives and Generation X's investing behavior has gotten wider over the past year, as 11% of the generation has stopped investing altogether in response to market losses and Wall Street scandals.

The number of GenXers who are no longer investing has jumped from just 4% in 2002.   As a result, only 59% of today’s GenXers own non-retirement assets, down from 70% in the previous year, according to the Third Annual GenX Survey released by the MainStay division of New York Life Investment Management LLC (NYLIM).

Cited as the number one reason for the decline in investment activity among the 52 million Americans born between 1967 and 1981 is “lack of funds” (58%), followed by:

  • “inadequate experience making financial choices” (29%)
  • losing “too much money in the past 12 months” (11%)
  • a distrust of Wall Street (32%).

“GenXers have been shaken by the prolonged recession and unstable job market,” Beverly Moore, Managing Director, NYLIM Retail Markets, said in a statement. “This has created a bias toward security, driving GenXers to reallocate their portfolios in favor of predominantly conservative financial products.”   In fact, the study found over the past twelve months, GenXers have grown more conservative in their investment behaviors and attitudes. Nearly one-third (31%) now describe themselves as “conservative,” up from 22% in 2002. Similarly, the percentage of GenXers describing themselves as “aggressive investors” declined from 20% in 2002 to 17% in 2003.

More Or Less?

Despite the slow down in saving and shift in investing ideology, GenXers remain ambitious in their long-term financial goals.   Six out of 10 (61%) are expecting a higher standard of living in retirement than their parents and 77% characterize their savings objectives as “equal to” or “greater than” their parents’, up from 2002’s numbers (See  GenXers Financially Focused ).

But this will have to be done on their own according to the majority of GenXers that feel neither the government nor their company plan will support them in retirement. More than three-quarters (76%) discount the impact of Social Security and almost half (48%) are bearish about their company retirement savings plans.

To accomplish these lofty goals, the generation has increased their ownership of insurance and real estate products, and decreased their investment in mutual funds and securities over the past 12 months.   As a result of this rebalancing, insurance emerges as the most popular financial product in 2003, purchased by 75% of GenXers (compared with 62% in 2002), followed by:

  • mutual funds at 71% (down from 85% in 2002).
  • real estate 55% (up from 12% in 2002)
  • securities 47% (down from 69% in 2002).

Additionally, cash positions and money market products continued to be attractive choices for 50% of GenX investors.  

Despite their increasing caution, GenXers remain less conservative in their investment choices than either Baby Boomers or Seniors. Overall, the 31% that describe themselves as “conservative” investors is lower than 45% of Boomers and 53% of Seniors that say the same.

Planning Ahead

However, “Few GenXers are investing sufficiently – or aggressively enough – to achieve their ambitious retirement goals,” observes Moore. “With a life expectancy of 85 to 89, GenXers may live for as many as 30 years on their retirement income. To remain on track, they need to develop a comprehensive financial plan, which includes an overall asset allocation approach, and stay the course.”

The number of GenXers with such a plan is on the wane, only one-third of the generation’s investors currently have a financial plan, but approximately 70% of those without a plan believe that they will need one in the future, a figure higher than previous years (See  GenX Seeking Financial Advice ). Not surprisingly, GenXers expect to develop a financial plan with the help of an investment professional. Fully half of this year’s respondents acknowledge needing “the help of professional advisors to manage investments,” up from 44% in 2002.

The survey, completed in March 2003, polled 515 US consumers ages 22 to 36 on their investment attitudes, behaviors, objectives and priorities.   Respondents were US residents with investable assets of $50,000 or more.