Young investors wary of jumping into market lows

Wed Aug 5, 2009 4:35am EDT
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By Erin Kutz

BOSTON (Reuters) - Young investors may accept the argument that those who begin investing when stocks are cheap end up with more retirement money, but after the turmoil of the past year, some find it hard to put their money in the market.

Asset managers and analysts say that those who invest in rock-bottom stocks of a bear market will see share values rise for decades.

But many in their 20s and early 30s are not buying rosy projections, due to immediate financial pressures and exposure to the longest recession since the 1930s Great Depression.

"I would keep all my money in cash," said Alex Corbacho, a senior at Boston University.

The trend has some worrisome long-term implications. Stock brokers may find themselves largely shut out of a big customer base, and demand for equities will likely be crimped as investors favor safer havens, hurting the stock market's prospects. It's also unclear whether these young investors will have accumulated enough to fund their retirements when the time comes.

Corbacho is no stranger to markets. At age 13 he invested his birthday money and a matching donation from his father, $1,000 in total, in tech stocks only to feel the sting when the Internet bubble burst.

He carried the lesson with him in early 2008, after seeing signs of economic trouble as an intern at a Boston investment bank. He put the majority of his stock investments, which had reached about $5,000, into a certificate of deposit instead.

Corbacho doesn't plan returning to stocks for a few years after graduation and is instead focusing on saving.   Continued...

<p>MIT Sloan Fellows participate in a simulated stock market during classes at the Massachusetts Institute of Technology Sloan School of Management in Cambridge, Massachusetts July 23, 2009. REUTERS/Brian Snyder</p>