UPDATE: Millennial investors are either very confident... or very cocky
By Ryan Vlastelica
Four times as many younger investors as older investors view themselves as knowledgeable about their finances
Are young investors just naive or acting in a way that makes a lot of sense, given where they are in their careers and how most experts say portfolios should be configured?
Maybe a little of both.
According to a survey conducted by AMG Funds that was released earlier this month, 81% of millennial investors considered themselves "extremely or very knowledgeable" when it comes to their finances. Just 19% of older investors felt the same way.
Some may view the results as a sign of arrogance on the part of millennials. That has some credence given the more modest assessment from older investors, who have been through a number of market cycles--including two massive recessions in the past 20 years--and may have been humbled as a result.
While the financial crisis scared off some millennials from investing entirely (http://www.marketwatch.com/story/millennials-are-finally-warming-up-to-the-stock-market-2017-06-06), the ones who did put money in the market may be feeling good because they have almost assuredly made money doing so. The U.S. stock market has been in an essentially uninterrupted uptrend ever since the 2009 bottom, more than tripling since that low, and with few major pullbacks along the way. Major indexes have hit repeated records this year (http://www.marketwatch.com/story/thatll-do-dow-the-averages-9-day-rally-is-overbut-still-historic-2017-09-21), volatility has been near all-time lows (http://www.marketwatch.com/story/is-this-the-day-wall-streets-fear-gauge-hits-rock-bottom-2017-05-08), and even mild declines of 3% have been in short supply (http://www.marketwatch.com/story/a-problem-for-buy-the-dip-investors-no-dips-to-buy-2017-08-08).
The risk of such an environment is that young investors may be complacent about the prospect of a major selloff, something analysts are growing increasingly concerned about (http://www.marketwatch.com/story/stocks-at-their-4th-most-expensive-level-ever-are-smack-dab-at-the-heart-of-bubble-territory-2017-09-22). In August, a survey from E*Trade suggested that a quarter of millennial investors (http://www.marketwatch.com/story/a-third-of-millennials-think-now-is-the-time-to-jump-into-the-market-2017-07-31) were planning to move out of cash and into new positions over the coming six months, showing far more risk appetite than their elders.