Some millennials, Gen Zers abandon investment accounts due to inflation

Some millennials, Gen Zers abandon investment accounts due to inflation

It’s been a tough year for the stock market and some consumers are closing investment accounts due to concerns about inflation and volatility, according to a recent survey by Ally Financial.

As investors brace for another major interest rate hike by the Federal Reserve, inflation remains hovering around a 40-year high and the S&P 500 is down nearly 20% year to date.

Meanwhile, nearly 1 in 5 consumers have closed an investment, trading, or brokerage account in the past 12 months, with the majority of closures, 21%, by millennial and Generation Z respondents, according to an Ally survey. of 900 investors.

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Nearly 40% of those surveyed sold some or all of their investments due to inflation, according to the report, and 31% sold assets out of fear of losing money amid stock market volatility.

‘Selling out’ can lead to regrets

Without a sufficient emergency fund, some investors may be selling assets to cover a higher cost of living, said Kyle Newell, an Orlando, Florida-based certified financial planner and owner of Newell Wealth Management.

Others may have reacted emotionally to the volatility of the stock market, especially younger investors with less experience.

“News can be scary at times, so it’s not uncommon for people to get nervous and sell out,” Newell said.

The news can be scary at times, so it’s not uncommon for people to get nervous and sell out.

kyle newell

Owner of Newell Wealth Management

But taking money out of an investment account can lead to regrets.

Many millennials and Gen Zers who invested in the past year have regrets, according to a recent study by MagnifyMoney. According to the survey, about 23% of millennials and 15% of Gen Z wish they had invested more, and about 15% of each group regret selling an investment.

High inflation, stock market volatility and geopolitical conflicts have happened before, Newell said, and those factors shouldn’t stop you from investing. And by selling when the stock market falls, you can “lock in losses” regardless of your long-term financial goals, he said.

‘Investments are tools’

Of course, the decision to invest in a brokerage account may depend on one’s goals, explained Sean Michael Pearson, CFP and associate vice president at Ameriprise Financial in Conshohocken, Pennsylvania.

“Investments are tools,” he said. “They work best when you decide what you need to do and then go buy your tools.”

If you’ve been saving and investing in pursuit of a goal, selling assets in a brokerage account isn’t necessarily a bad thing, Pearson said. Once you’re ready to fund that goal, it makes sense to sell.

Alternatively, if you’ve decided that a particular investment doesn’t align with your goals, a targeted sale may also make sense. You can then find other assets that better suit your needs.

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