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Will younger generations start to invest?

JUN. 23, 2020

Will 2020’s sharp market downturn leave investors with lingering scars, similar to the 2008 downturn? One place to look for signs is in the behavior of retail investors.

A recent Fidelity Investments survey found that 18% of all investors sold the entirety of their equity holdings between February and May this year. Nearly one-third of investors over age 65 liquidated all their stock investments. Millennial and Generation Z workers have been the slowest to commit to saving for retirement, and this year’s volatility may act as a further deterrent. Nearly a quarter of all Americans have no retirement savings at all, but this share is higher among 18-29 year-olds (38%) and 30-44 year-olds (27%).

graph of percentage of americans with no retirement savings in 2019, by age group

There are initial signs growing interest in investing among younger generations. Online trading activity is surging, thanks in part to slashed commissions and an abundance of free time during the coronavirus shutdown. Platforms such as TD Ameritrade, E*Trade, Schwab and Robinhood reported record account growth of as much as 170% in Q1 of 2020.

While rising participation in trading app Robinhood has garnered media attention, substantial levels of cash remain on the sidelines. Money market accounts are at a near-record high of $4.7 trillion, up $1 trillion in three months and double the level from three years ago. That growth has come at the expense of stock and bond mutual funds, which saw assets decline by $105 billion over the past four weeks, the longest streak of negative flows in three years. A reversal of these flows with retail investors returning to equities will be essential for stocks to continue their recent rally.

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