Millennials must avoid one big 'temptation' if they want to properly save money, UBS' US equity chief says
Keith Parker, UBS' chief US equity strategist, says millennial investors have been scarred by the stock market turbulence that's unfolded throughout their lives.
As part of a wide-ranging interview, he offered some suggestions for how millennials can better handle their investment future.
It almost goes without saying that millennials haven't been dealt the greatest set of investing circumstances.
The dotcom bubble of the early 2000s was the first scar on their psyche, and it was followed less than a decade later by a financial crisis that saw the failure of multiple large US banks.
Even now, with US equities firmly entrenched in the ninth year of the bull market, purchasing stocks is a tough sell, simply because valuations have gotten so extended.
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This burgeoning class of millennial investors needs to shrug off those overhanging fears and dip its toes into the stock market, says Keith Parker, UBS' chief US equity strategist. He argues that any strong long-term portfolio should have a considerable equity portion, and he even has some ideas how young investors can deal with current market conditions.
In an interview with Business Insider, Parker elaborated on those thoughts and also expressed views on his bullish 2018 forecast, President Donald Trump's newly announced tariffs and the prospect of a trade war, and his biggest fear for the market. Read the full interview here.
Here's what Parker had to say (emphasis ours):
"For better or worse, we're all functions of our own experiences and biases. The younger millennial generation has witnessed a financial crisis, housing collapse, and stock market collapse — all very recently.
There's temptation to believe that could continue happening again. It's getting over that inherent cognitive dissonance with investing that allows you to put money to work. And over the long run, it does pan out.
Save when you're young. The benefits of annual compounding interest when you don't need the money now is tremendous.
Investing early, and investing in growth assets like equities, is recommended. Diversify exposure as well, possibly looking outside the US into something like emerging markets. Equity valuations aren't cheap, but over the long run you have corporate in a strong growth backdrop, and you have a government doing pro-business policies.
Stay with secular themes. Over the long run, certain sectors and industries have defensible business positions — in technology, healthcare, and industrials — will outperform during this."
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