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TD Waterhouse Note the Obvious About Young Investors

TD Waterhouse have come up with a groundbreaking study 😛 about young investors.

Apparently only 10% have a professionally-developed financial plan vs. 38% for all ages. Those aged 18-24 are less likely than older investors to use all types of investment services, less likely to have a professionally-developed financial plan and more likely to be managing their investments entirely on their own.
When asked if they used more specialized services including those of a financial planner, full-service broker, discount broker or investment manager, in all cases the propensity to use such services is dramatically lower among 18 to 24 year olds.

“This is a classic ‘Catch 22’ scenario,” says says Patricia Lovett-Reid, Senior Vice-President, TD Waterhouse Canada Inc. “Younger, inexperienced investors are in need of the most guidance and encouragement in setting and achieving financial goals. Yet it appears they’re least likely to be getting such advice.”

Personally, I have no idea how this is a catch 22….Young people don’t invest because they are arrogant/ignorant and cause their parent’s don’t help them out (who are themselves ignorant of good money management). Of course, this is just an on-average comment I’ve made so…..

Apparently, younger investors also have the lowest expectations for the average rate of return on their investments in 2007 – 5.2% vs. an average of 8.8% for all ages.

Here is a graph of the “Average Expected Rate of Return on Investments in 2007 (%)”

Apparently lower ROI expectations of younger investors are directly related to their lack of investment advice. Yes, I agree, education plays a role, but quite frankly, young adults, a) feel they don’t have money, and b) generally don’t have a long term focus for their money.

Other highlights:

– The average age at which people begin contributing to an RSP is 28.
– Young adults are the most likely to manage their investments on their own.
– Those aged 65-69 are more than twice as likely to use a discount broker than the average of all age groups (18% vs. 7%).
– The incidence of using a financial planner, full-service broker, private investment counsellor, portfolio manager or investment manager increases directly with age up to 64, then drops precipitously from the 50-64 year-old age group (33%) to the 65-69 year-old group (19%).

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