To a large extent we are a product of our environment. Our life experiences not only shape out behavior, but at its very core, they shape our thought process. The Great Depression forever changed a generation of people. It appears the "Great Recession" may be having a similar effect on another generation.
In a May 5th MSN Money article, Kathy Kristof explores what effect the financial crisis is having on Generation Y (those born between 1977 to 1994). It seems that this generation that lives life on the edge in most of their pursuits, are quite risk-averse when it comes to selecting their investments. That could be a decision that results in them coming up short in retirement. Here are some other interesting items from the article:
There are much better alternatives for the ultra-conservative Gen Y investors than money market accounts, Treasuries and CDs. A conservative strategy focusing on high quality, low risk dividend stocks should significantly out-perform the above investments, with very little incremental long-term risk. Based on my risk rating, here are five low risk companies for conservative investors to consider:
1. The Coca-Cola Company (KO) - Risk Rating: 1.25 - Yield: 3.82% (analysis)
2. Johnson & Johnson (JNJ) - Risk Rating: 1.25 - Yield: 3.62% (analysis)
3. The Clorox Company (CLX) - Risk Rating: 1.25 - Yield: 3.45% (analysis)
4. United Technologies Corporation (UTX) - Risk Rating: 1.00 - Yield: 2.97% (analysis)
5. SYSCO Corporation (SYY) - Risk Rating: 1.00 - Yield: 4.06 (analysis)
What the Gen Y investors haven't realized is that the path they are following carries risk also. Ironically, they may have chosen the most dangerous investment of all.
Full Disclosure: Long KO, JNJ, CLX, UTX, SYY (my income holdings)
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