Millennial investors have often been described as being overly conservative with their portfolio allocations. An analysis by Vanguard finds the reality is more nuanced than the common perception would suggest. As an overall group, millennials [generally those born from the early 1980s through the early 2000s] have greater exposure to equities than members of the older baby boom and silent generations. Among millennial investors, however, there is a small, but significantly sized, group that is far underweighted in equities.

The typical millennial investing household that is a Vanguard client allocates approximately 90% of their portfolio assets to equities. Given their age and investing time horizon, this makes sense, especially for those who are investing retirement savings. Most are relatively new to investing, or at least new to Vanguard, with a median account tenure of four years. Their accounts tend to be small, at 21% of Vanguard’s median account balance. (Again, not surprising given their age and earnings power.) About one-third of millennial investors own a target date fund, quite possibly because such funds are the default option in many workplace retirement plans.

Overshadowed by the characteristics of the median millennial Vanguard client are the 19% who have no exposure to equities. This percentage is up from 13% in 2012. It is also higher than the proportion of baby boomer and silent generation clients who eschew equities (12% and 13%, respectively).

Vanguard offers a few reasons why these young investors are avoiding equities. One may be a hesitancy or lack of effort to put money to work in the stock market. One-third of millennial households that opened their first account in the past year had no equities. Another factor may be the financial crisis. More than twice as many millennial investors who opened their Vanguard account in 2008 or later (22%) have no exposure to equities compared to those who opened their account in 2007 or earlier (10%). Slightly more than three-quarters of millennial investors opened their accounts in 2008 or later.

Baby boomer and silent generation investors may be more willing to invest in equities because of their experience with the 1982–2000 bull market. They may also be more willing to hold equities because of their pension income, concerns about future costs and desires to pass along wealth to heirs.

Source: “Risk Taking Across Generations,” by Thomas J. De Luca and Jean A. Young; Vanguard, June 2018.