Maybe Millennials don’t have it so bad

A perspective from E*TRADE Securities 07/19/19

Last year, we wrote about Millennials and how many of them are getting a late start to investing, potentially missing out on opportunities along the way. The numbers we cited were sobering: Three in five Millennials lack stock market exposure, while two-thirds have saved nothing for retirement.1,2 Moreover,  nearly 60% of young investors stated they had made an early withdrawal from their retirement account.

But some interesting data compiled by Bloomberg shows that, for Millennials that do take the plunge, the gettin’ has been pretty good.3

Why the hesitation in the first place?

When you consider their circumstances, Millennials’ hesitation to dive headlong into the financial markets makes sense.

Collectively, Americans owe roughly $1.5 trillion in student loan debt, with much of it borne by Millennials.4 Saddled with this albatross, many Millennials—defined as those born between 1981 and 1996—feel they have no choice but to postpone investing until they can pay off their loans.

But according to Bloomberg, debt levels notwithstanding, Millennials have enjoyed some serious market tailwinds relative to other generations.

Some generations have been “luckier” than others

To put Millennials’ situation in context, the Bloomberg data segregates nine different generations, beginning with the so-called Gilded Generation of the late 19th century. By considering the performance of a 60/40 equity/fixed-income portfolio during each generation’s peak earnings years, the data show that some generations have simply been “luckier” than others.

US generations since 1871

Source: Bloomberg Finance L.P.


Financial asset performance by generation

Source: Bloomberg Finance L.P. Data reflect performance of a US 60/40 equity/fixed income portfolio during the prime earnings years of each generation.


Of all the generations studied, Baby Boomers have been the luckiest. Boomers, who came of age during the historic economic expansion following World War II, enjoyed a 9.13% annualized return on their 60/40 portfolio in their peak earnings years.

Millennials have had it pretty good

Second on the list? Millennials. Those availing themselves of the markets have so far realized an 8.43% annualized return from a 60/40 portfolio. Moreover, Millennials have benefited from some of the lowest levels of market volatility—even after taking into account the financial crisis of 2008-09.

With a 6.27% annualized return on a 60/40 portfolio, Gen Xers haven’t done nearly as well, while the Lost Generation of the 1920s and ’30s fared the worst on nearly every count.

Carpe diem, Millennials

Sure, the data doesn’t consider extenuating circumstances and participation rates, but the message for Millennials who are able to put their money in the markets is pretty clear: Seize the day.

But how to do that?

“There are many ways Millennials can begin the process of saving for retirement, and they don’t have to eat up a big amount of their paycheck,” says Mike Loewengart, head of investment strategy at E*TRADE Financial. “Millennials have the advantage of time. Even small amounts invested early on can make a big difference down the road.” Loewengart gives the following examples:

 Participating in workplace retirement plans: Placing a portion of your paycheck into a tax-advantaged 401(k) or 403(b) account is a great place to start. Employer-sponsored retirement accounts are a way to gain basic exposure to the markets. And contributing enough to maximize the employer match is the closest thing to free money investors are likely to find.

•  Dollar-cost averaging: With dollar-cost averaging, an investor deposits a pre-determined dollar amount into an investment account on a regular basis, rain or shine. Dollar-cost averaging eliminates the temptation to time the markets and allows investors to acquire more shares when prices go down. Workplace retirement plans are a prime example of dollar-cost averaging.

•  Digital solutions: Recurring contributions to a brokerage account are another example of dollar-cost averaging. Loewengart notes that E*TRADE provides the option to automatically withdraw funds from your paycheck into a professionally managed Core Portfolios account or brokerage account. For those who elect recurring contributions, E*TRADE recently lowered the minimum to a bite-sized $25.  

 Starting early: And, of course, it helps to start early in order to harness the power of compounding. Compounding is the process of earning a return on reinvested principal and interest.

Millennials face many obstacles. But from a market perspective, few have had it better. Carpe diem, Millennials—while you can. 

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1. Federal Reserve Bank of St. Louis, “Millennials Are Not Investing in the Stock Market—But Might Want to,” March 7, 2018. https://www.stlouisfed.org/open-vault/2018/march/millennials-not-investing-stock-market

2. National Institute on Retirement Security, “New Research Finds 95 Percent of Millennials Not Saving Adequately For Retirement,” February 27, 2018. https://www.nirsonline.org/2018/02/new-research-finds-95-percent-of-millennials-not-saving-adequately-for-retirement

3. Bloomberg, “Quit Whining, Millennials. Gen X Has Had It Worse: Macro Man,” July 12, 2019.

4. Board of Governors of the Federal Reserve System, Consumer Credit Outstanding (Levels), September 10, 2018. https://www.federalreserve.gov/releases/g19/HIST/cc_hist_memo_levels.html

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