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Young investors may miss out in the dash for cash

Different generations put their money to work in different ways. Below is a snapshot of investment choices made by Americans from different age groups. The younger crowd, especially those born after 1996, are playing it safe, keeping a good chunk of their wealth in cash.

This cautious approach, however, comes with a cost. While keeping money in cash might feel safe, it doesn't grow much, especially with inflation eating away at its real value.

On the flip side, bonds – another traditionally stable investment – aren't getting much love from the younger generation either. Generation Z has only 5% of their portfolio in bonds, while the older Baby Boomers are sitting at 20%.

The reluctance to invest in bonds might have made sense when they weren't paying much in return, but things have changed, and bonds are starting to look more appealing.

Basically, sticking too much in cash or steering clear of bonds could mean that the younger generation are missing out on the growth that other investments can offer. If you are in your twenties and you have a whopping 50 years time horizon, then cash is trash. It’s overly exposed to future inflation and doesn’t offer enough return to offset this risk.

Source: The Economist

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• China is investing heavily in Mexico

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• Foul language is on the rise on US television

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