Despite the widely held belief that younger investors have become tremendously risk-averse due to the economic crisis, Vanguard is finding that younger investors have increased their equity exposure considerably.

The youngest participants in defined contribution plans, 20-year-olds, have an average equity exposure of 84.7%, up from 40.7% in 2003, Vanguard said.

“The ‘lost decade’ and financial crisis did not lead to a ‘lost generation’ of investors in 401(k) and other defined contribution plans,” said John Ameriks, co-author of the report, Generations: Key Drivers of Investor Behavior. “In fact, we found that many younger people hold balanced investments in their plans that include a healthy portion of stocks.”

Vanguard researchers attributed the high exposure to equities to automatic enrollment and target-date funds.

Steve Utkus, co-author of the report, noted, “Younger participants are now more likely to be invested in a balanced portfolio, offering a better diversified mix of stock and bond investments, regardless of current market conditions.”

Lee Barney writes for Money Management Executive, a SourceMedia publication.

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