God bless those young kids who followed Billy into Pcln!
>NEW YORK, Jan 22 (Reuters) - More than a few 20- and 30-somethings have had their dreams of retiring at 35, after cashing in their Internet-stock-packed portfolios, dashed with the decline of the stock market in the past year.
So, will young investors stick around now that the keg is tapped out after Wall Street's five-year party featuring double-digit gains?
Some have thrown in the towel, but many say they are in for the long haul -- disappointed, but not disillusioned, by the market's downturn.
"I'm still convinced, in the long run, that (the stock market) is a great investment," said Lucas Watson, 29, an assistant brand manager at Procter & Gamble. "I may be more realistic about what I'm going to earn, but it hasn't scared me away from investing."
YOUTH MOVEMENT OF MONEY
Their wallets fattened by a supercharged U.S. economy, younger investors have rushed into the market in recent years, armed with a flood of financial information and encouraged by the promise of hefty returns.
In 1997, 18-to-29 year-olds made up only 5 percent of all investors, according to an annual Securities Industry Association (SIA) survey. By 1999, that age group had grown to 10 percent.
It eased to 7 percent in 2000, a year that had the effect of pouring a bucket of cold water on hot-to-trot investors.
The Nasdaq composite, which had gained almost 86 percent in 1999, soared to an all-time high of nearly 5,050 in March, but ended June at 3,400, setting the stage for last year's 39 percent decline. The S&P 500 followed its 19.5 percent gain in 1999 with a drop of some 10 percent in 2000.
Many youngsters previously had witnessed the market going in only one direction -- up.
The early part of 2000 was a sobering time for Watson, a business school graduate who forecasts his retirement nest egg on spreadsheets.
"I'm on the right path for all those goals about saving early enough in your career ... and then to watch that all evaporate right before my 30th birthday is a strange psychological event," Watson said.
THE GREEN EXPECT MORE GREEN
Nearly half of all investors, according to the SIA, have been investing for less than 10 years -- a period of phenomenal stock market growth amid a record U.S. economic expansion.
Half of those investors -- 24 percent of the total -- have been investing for just five years. For the five years from 1995 to 1999, the Standard & Poor's 500 Index gained an average 26 percent annually, and the Nasdaq Composite Index rose an average 42 percent.
"These people have never seen a downturn," SIA spokeswoman Margaret Draper said. The group has been trying to work with investors to explain that "25 percent is not the norm," she added.
They may have their work cut out for them. The SIA survey showed investors aged 18 to 29 said they expect their portfolios to return 46 percent a year. Those over the age of 65 anticipated a 23 percent gain. Over the last 65 years, total returns for S&P 500 companies have averaged 11.8 percent.
Stocks, particularly high-tech shares, have taken on Superman-like qualities in the eyes of many investors, said Ned Riley, chief investment strategist at State Street Global Advisors in Boston and a 32-year veteran in the world of finance.
"Bubbles occur from time to time, and they are usually the product of inexperience and avarice -- but more importantly, a certain element of ignoring the lessons of history," Riley said.
BEAM ME UP SCOTTY, PRICELINE.COM GOES UNDERWATER
The market's downturn has not chased young investors out, but it has prompted some to take a longer-term view of their investments.
"I'm not checking my stocks three times a day like I used to," said Elizabeth Keogh, 28, a former employee of Internet retailer Priceline.com Inc.(NASDAQ:PCLN).
Keogh said she and her husband had planned to build an addition onto the house and pay off graduate school loans more quickly with their expected stock market winnings.
"People say the bubble is going to burst, but you look at your returns, and you look at the venture capital flowing in, and you think: 'This is the New Economy'," Keogh said.
But those grand plans had to be pushed back after the pile of Priceline options and stock she held turned virtually to dust, Keogh said. "It felt like someone just sucker-punched me."
Priceline.com shares have slumped some 95 percent in the past year as the "name-your-own-price" service's hopes for profitability evaporated in the broader dot-com bust.
The company gained notoriety with its advertising campaign featuring actor William Shatner, known for his role as Capt. James T. Kirk in the popular television series "Star Trek."
Still, it hasn't soured Keogh on investing. She said she and her husband have simply learned to spread their investments across a more diverse variety of sectors. "I'm still definitely bullish on the market in the longterm," she added.
Watson admits that the idea of a protracted economic slowdown worries him, but he said the market's sudden weakness will not keep him from piling money into stocks.
"I'm taking a 30-year horizon," Watson said. "So when I look up 10 years from now, I'm going to feel pretty psyched about where I am, rather than saying, 'God, I have to make my number this year,' and watching it like a hawk on a daily basis."
KIDS TODAY - TOO MUCH INFORMATION?
The proliferation of information about personal finance through television and the Internet, and the growing ease of access to trading and stock prices have made stock market investing seem less like an exclusive club, experts say.
People in their 20s and 30s also are the first to come of age amid self-directed retirement programs, like 401(k)s, where they themselves decide where to allocate retirement savings.
With one out of two U.S. households now participating in the stock market in some way, investing has become dinner-table conversation, helping people become comfortable with it at a younger age.
"Kids today -- it's just much more part of their culture. I didn't grow up with CNNfn. I didn't grow up with all of these personal finance things," the SIA's Draper said.
Jeffrey Lillich, 32, a financial controller for mattress-maker Tempur-Pedic, has been investing for about seven years and checks his stocks several times a day on the Internet.
Lillich has been hurt, particularly when he lost nearly all of a $5,000 investment in technology stocks, but he has not lost his faith in the market.
"I got to the point where I just wouldn't look, because as poorly as I have done, it definitely would be the wrong move to get out (of stocks)," Lillich said. "I thought of it as a buying opportunity." |
