401(k) Investing: Millennials Might Actually Get it

All the angst is paying off. A new survey from the Investment Company Institute finds millennials heeding investment advice and investing in mutual funds earlier that generations that came before.

Nearly one-third of millennial households owned mutual funds in mid-2015, according to the report. About half of Baby Boom and Gen X households—being older and more likely in their peak earning and saving years—owned mutual funds in mid-2015. Though the share of millennial households that own funds is smaller than that of older generations, these millennials started investing at a younger age than previous generations.

ICI’s annual survey, released in two studies, “Ownership of Mutual Funds, Shareholder Sentiment, and Use of the Internet, 2015” and “Characteristics of Mutual Fund Investors, 2015,” shows that the median age at which adult millennials—born between 1981 and 1997—first purchased mutual funds was 23. The median age for first mutual fund purchase for households headed by a member of Gen X—born between 1965 and 1980—was 26, while Baby Boomers—born between 1946 and 1964—were in their thirties when they made their first mutual fund purchase.

Baby Boom Generation Represented Largest Share of Mutual Fund–Owning Households

The ICI studies find that households headed by members of the Baby Boom Generation were the largest share—40 percent—of all mutual fund–owning households in mid-2015. The next-largest shareholder group is Gen X households, which represent 32 percent of mutual fund–owning households, followed by adult millennial households, which make up 16 percent. Two older generations, Silent and GI Generation households, constitute the remaining 12 percent. Baby Boom households also held the largest share of households’ mutual fund assets at that time, with 53 percent of the total. Generation X households held 27 percent of household mutual fund assets, while the two generations preceding the Baby Boomers—the Silent and GI Generations—combined, held 15 percent. millennials, because they are younger and have had less time to accumulate savings, held 5 percent of all household mutual fund assets.

“Though the Baby Boom Generation is frequently highlighted for its significant role in mutual fund investing, this study shows that millennials are also focused on saving and investing,” said Sarah Holden, ICI senior director of retirement and investor research. “Our 2015 household survey finds not only that millennials are buying mutual funds at a younger age than any other generation, but also that nearly one-third of the 26.4 million households headed by millennials owned mutual funds—showing that this generation is investing for the future.”

Other key survey findings for 2015 include:

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