The highest inflation rate in four decades has forced Americans to cut back on spending in numerous ways, from buying cheaper and less healthy food to foregoing long road trips. Many — younger Americans in particular — also have closed investment accounts to put their money toward something else, according to a recent survey from Ally Financial.
The survey, which polled 900 consumers who have had investments in the financial markets over the past 18 months, found that 17% of respondents closed an investing, trading or brokerage account during the past year. Millennials represented nearly half (49%) of those who sold some or all of their investments, while Gen Z represented 17%.
Nearly four in 10 (38%) of those surveyed said they sold some or all of their investments due to inflation, while 35% sold some or all to cover household expenses. The stock market’s poor performance in 2022 also played a part, with 31% of respondents saying they sold investments because they didn’t want to lose money.
For those who closed one or more investing/trading/brokerage accounts, 51% cited inflation and higher expenses, while 45% said they have less time now to manage investments than they did 12 months ago.
Gen Z consumers continue to cast a wary eye on investments amid an environment of high inflation and poor stock market returns. As Reuters recently reported, more than one-third of Americans ages 18 to 25 had no investments, according to a separate survey from Better Money Habits. Nearly half of Gen Zers have some form of debt — including student loans and credit cards — while 40% said they find it difficult to afford day-to-day necessities.
Although selling investments is understandable in an uncertain economy and struggling stock market, it’s not necessarily the right strategy. Another recent study, this one from MagnifyMoney, found that 23% of millennials and 15% of Gen Zers wished they had invested more, CNBC reported, while 15% of each group regrets selling an investment.
Lindsey Bell, chief markets and money strategist for Ally, advises taking the long view when it comes to investments.
“It’s not time to give up on investing now,” Bell wrote in a recent blog on the Ally website. “A better approach — if you were among those who got caught up in the fervor of the boom — is to reframe how you think about money and investments. The stock market should not be treated like a casino. Rather, it’s a mechanism that can help you build long-term wealth over years and decades, not days or weeks.”
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