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Some millennials, Gen Zers are ditching investment accounts because of inflation

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

As investors brace for another big interest rate hike from the Federal Reserve, inflation is still near a 40-year high and the S&P 500 is down nearly 20% since the beginning of the year.

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

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Nearly 40% of respondents sold all or part of their investments due to inflation, according to the report, and 31% sold assets for fear of losing money due to stock market volatility.

“Reselling” can lead to regrets

Without a sufficient emergency fund, some investors may sell assets to cover a higher cost of living, said Kyle Newell, a certified financial planner based in Orlando, Fla., and owner of Newell Wealth Management.

Others may have reacted emotionally due to stock market volatility, especially younger, less experienced investors.

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

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

Kyle Newell

Owner of Newell Wealth Management

But cashing out an investment account can lead to regrets.

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

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

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“Investments are tools”

Of course, the decision to invest in a brokerage account can depend on someone’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 have decided that a particular investment does not fit your goals, a targeted sale may also make sense. Then you can find other assets to better suit your needs.

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