After seeing their stock portfolios mostly rise in recent years, 20- and 30-something investors are living through their first lengthy market rout, with mixed reactions.
Some are taking the losses in stride, citing the decades left until they retire – and even looking for buying opportunities in this bear market – while others are pulling money from their portfolios to have funds on hand amid the economic downturn caused by the spreading novel coronavirus. Others are simply relieved they haven’t invested much, if anything, spooked after watching their parents suffer through similar losses during the 2008-09 global financial crisis.
The stock-market turmoil could add to the hesitation many millennials already have about investing, which could affect their retirement planning in the long term, says Jason Heath, an advice- and fee-only certified financial planner at Objective Financial Partners Inc. in Markham, Ont.
“I worry, to an extent, that this is the sort of thing that keeps young investors out of the stock market, despite what has been a great run for markets up to this point,” Mr. Heath says.
Rising house prices might also persuade more millennials to put money into real estate, rather than the market, which he believes could be a mistake in the long term.
“It’s like a perfect storm to deter millennials from investing,” Mr. Heath says. “Stock-market fear and high real estate prices may be causing them to forgo investing in favour of homeownership. One big concern is that a recession, while debt levels are so high, causes declining house prices and millennials get really burned.”
Mr. Heath points out to investors that the S&P 500 has more than tripled since the depths of the financial crisis, even after the recent market decline.
“I think that’s what people miss during all of this, is that stocks, over the long run, do perform quite well,” he says, calling this an advantage for millennials. “The cost of that is volatility in the near term.”
It's the first bear market for Christopher Villegas-Cho, 28, who has been investing on his own since 2013.
“There are a lot of nerves and anxiety for sure,” says Mr. Villegas-Cho, who works in the financial services sector in Toronto. “It hurts, but I try not to look at my portfolio as frequently as I used to, knowing that the drop could trigger an emotional response that I don’t want.”
Instead of focusing on the losses, Mr. Villegas-Cho is thinking about buying stocks in sectors he likes, such as banking, as well as real estate investment trusts. About 25 per cent of his portfolio is in cash, some of which he’s hoping to invest in the near future amid the sell-off.
"I'm keeping an eye on a couple of stocks and seeing what price I feel comfortable buying them at, regardless of whether they continue to go down," Mr. Villegas-Cho says, adding many of his friends are doing the same.
“We are nowhere near retirement so, on the time frame, I think we all feel comfortable with the decisions we’ve made” to keep investing, he says. That’s unlike some of their parents who are regretting owning certain stocks, or not selling before the market sank.
Sarah Dion-Marquis, 30, of Ottawa has been investing for about a decade, starting shortly after the 2008-09 global financial crisis when she graduated from university. “At the time, I worked in the media industry and my colleagues were worried about their pensions,” she recalls. “The market eventually came back up.”
Today, Ms. Dion-Marquis and her spouse have money in exchange-traded funds (ETFs) and stocks through discount broker Questrade and robo-adviser Wealthsimple, but didn’t have much money they could access quickly if needed, given the current economic climate.
Last week, the couple decided to pull about three months’ worth of expenses out of the investments in their tax-free savings account (TFSA) with Wealthsimple and put it into a Tangerine Bank savings account with a 2.75-per-cent introductory interest rate for new deposits.
“That way I can access the money easily if I need it,” says Ms. Dion-Marquis, who has a 2½-year-old son and a second child due in September. “I still have TFSA money with Wealthsimple and I didn’t touch my son’s RESP [registered education savings plan] and my RRSP [registered retirement savings plan]. I haven’t done anything with my Questrade ETF and stocks. I’m just hoping things will settle a bit.”
Ms. Dion-Marquis has been nervous about her investments, but feels better having some money set aside in a high-interest savings account.
“The short term doesn’t matter for my RRSP, RESP, TFSA and other investment accounts,” she says. “I will not need this money in the near future. ... Like most investors, I didn’t avoid the downturn, but I will be in a good place when the markets come back up again.”
As for investing more during this market drop, Ms. Dion-Marquis says she’s busy with work and family but plans to look more closely at stocks she thinks could bounce back, such as Amazon, Uber, utilities and the five big banks.
Simon Tanner, principal financial adviser with Dynamic Planning Partners in Vancouver, says he’s been “pleasantly surprised” at how well many of his millennial clients are taking the market drop so far.
"I've found they've been very receptive to being reassured," he says.
Mr. Tanner says millennials not only have a longer time frame to invest, and can weather more volatility as a result, but they're also likely to have fewer assets than older generations, which can make the losses appear less troubling.
Millennials have more immediate concerns, he says, such as job security and paying their mortgage and debts.
Still, he encourages younger clients to stay invested.
“The only way, in my opinion, someone doesn’t recover from this is if they [give up] and run,” he says. “You don’t need it all tomorrow.”