TDFs Get Millennials on the Right Track

Most Millennials, those between the ages of 22 and 37, are appropriately invested, according to new research by Vanguard. On average, they have 90% of their portfolio invested in equities, which is consistent with the glide path of the Vanguard Target Retirement Funds geared for people in that age group.

One-third of Millennials own target-date funds (TDFs), Vanguard found.

“Target-date funds are reshaping investors behavior of Millennial and Gen X investors, with the potential to improve outcomes over an investing lifetime,” says Jean Young, senior research associate for the Vanguard Center for Investors Research and author of the paper, “Risk-Taking Across Generations.” “Younger investors are benefiting from balanced, diversified portfolios and shifting away from extreme equity allocations that we’ve witnessed in the early years of previous generations.”

However, 19% of Millennials have no equities in their portfolios, up from 13% in 2012. Before the Great Recession of 2008, only 10% of Millennials had zero-equity portfolios.