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Stop Bashing Millennial Investors. Bash Their Parents Instead

Millennial investors are suffering a media pile-on. In the wake of a survey showing they are leery of stocks, they've been branded "financial Neanderthals" whose psyches are scarred by "sustained financial blows that could forever shape their investing mindset." Because they prefer safe, low-yielding investments, the line goes, these feckless youth have doomed their retirements.

Except they haven't. Millennials may talk the anti-stock talk, but their retirement savings tell a different tale. While a Gallup poll found that this younger cohort views stocks with fear and loathing, data from Fidelity Investments, the largest 401(k) provider in the U.S., finds them embracing stocks. Millennial retirement plans are 84 percent equities, Fidelity says. That embrace may be inadvertent, as many younger workers are automatically enrolled in target-date funds which automatically lower workers' stock exposure as they approach retirement. But whether millennials know it or not, many of them are making the right long-term moves in their retirement accounts. The finger-pointing belongs elsewhere -- with their parents and grandparents.

Baby boomers' retirement stock portfolios have swelled as the market has hit and stayed near record levels. And that is exactly the opposite approach most financial planners recommend for people closer to retirement age. Only 57 percent of boomer retirement plans were in stocks in 2009, compared to 69 percent now, according to Fidelity.

Like their younger cohorts, baby boomers may not be doing this deliberately. A portfolio that was split 50/50 between stocks and bonds two years ago would now be nearly 60 percent stocks, with the jump entirely accounted for by the stock market's long rise. Target-date funds or managed accounts would adjust those portfolios, but most boomers don't use such options. They tend to make their retirement fund choices and then let the accounts be. Of the boomers who are do-it-yourself investors, 55 percent haven't touched their accounts at all in the past two years, Fidelity found.

Workplace retirement savings plans show only one part of the financial picture. As Fidelity vice president Jeanne Thompson points out, older people who expect steady, bond-like pension income can take more stock market risk. As long as they don't panic and sell into market drops -- and have the financial wherewithal to sit out market cycles -- they may be fine holding more in stocks.

But that's a big if. With less time to wait out market downdrafts or earn back any losses, it's older investors who are at risk of sabotaging their financial future, not their kids.

More stories by Ben Steverman:

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