For Millennial Investors, a Harsh Lesson in Market Gyrations

Mario Tehuitzil, 27, a pediatrics assistant, said he felt a “a punch to the gut” when he learned his investments had dropped more than 40 percent.

Watching the wild swings in the stock market has been a heartbreaking experience for Jasmine Okougbo, who started investing only last month.

Ms. Okougbo, 26, a business operations manager in Tucson, has an individual retirement account set up through her company and shares she got from her parents for her birthday. In one week, the value of her investments sank 65 percent.

“I don’t think I will be buying or trading on the market again anytime soon,” she said. “I still don’t think it has hit me how much I lost so quickly.”

For many millennials, the recent stock market gyrations have been a painful lesson in volatility that is being driven by fears that inflation and interest rates could rise faster than expected. Many have retreated from the market into savings accounts.

Twitter feeds quickly filled with teary, wailing GIFs and heart emoticons cracked in two — pithy punctuation about anemic 401(k) accounts being whittled down to wisps. Many young investors bemoaned the misfortune of equity portfolios shriveling up weeks after their cryptocurrency holdings also began deflating.

Lulled into confidence by the second-longest bull run in history, some had forgotten the passwords to their trading accounts and, to their panic, were locked out.

Mario Tehuitzil, 27, ducked into a restroom to check his cryptocurrency and stock holdings on Monday and felt “a punch to the gut,” then a growing “rush of anxiety and nausea.” His $33,000 stock portfolio had plummeted by more than 40 percent, to $19,000 in value, before swelling back to $24,000 on Wednesday.

“I’m aware of the risks but I never expected this rapid and severe drop,” said Mr. Tehuitzil, a New York-based pediatrics assistant. “Looks like the down payment for an apartment I’ve been eyeing will have to wait.”

Millennials, a sprawling and diverse demographic generally said to be born between the early 1980s and the early 2000s, are known for their passion for social media and an affinity for instant gratification.

But as investors, haunted by the trauma of the Great Recession, they have been mostly cautious. Many young people struggling to find work retreated back to school or into part-time work. For millennials living paycheck to paycheck and sometimes bunking with their parents, saving for retirement seemed a remote priority as they watched debts pile up.

Since hitting bottom in 2009, however, the stock market has more than tripled its value. More millennials began venturing into investing, toggling between stock apps and cryptocurrency charts on their phones and boasting of good returns on Twitter and Snapchat.

Rather than turn to professional advisers, who tend to handle much larger amounts than most young people have to invest, many millennials also tapped a growing roster of so-called robo-advisers that offer low-cost, autopiloted portfolio management.

Josh Stillman, 27, was too afraid to look at his retirement account this week but saw on Wealthfront, a robo-adviser he began using last year, that his investments had slumped 3 percent during the sell-off before recovering somewhat.

Mr. Stillman, who produces and hosts digital videos in Los Angeles, said he taught himself about investing by conducting online research and watching YouTube tutorials.

“I feel like my formal education did not educate me at all for investing or planning for my future,” said Mr. Stillman, who has a bachelor’s degree in anthropology from the University of Rochester.

Only about a third of millennials currently hold stocks. And more than 80 percent of young investors — a far higher share than among older age groups — describe their investing strategy as “conservative,” according to survey data released this summer by the Legg Mason asset management firm.

But the survey, conducted as major indexes were surging to new highs amid ostensibly low volatility, found that the group expected to eventually take on more risk than their elders. Many have piled into virtual currencies like Bitcoin.

Accustomed to a steadily rising stock market and the allure of astronomical gains in cryptocurrencies, millennials have a far different expectation of what typical returns look like compared with investors who have seen more cycles.

Millennials now expect an average annual return of 13.7 percent, compared to the 7.7 percent return that baby boomers expect, according to a survey last year from the AMG asset management company. Young investors are four times as likely as boomers to consider themselves to be highly knowledgeable.

But when the slump overtook the market on Friday, many were stunned.

“They’ve never seen a sell-off like this, and it’s especially scary because they don’t know who to ask for advice — they may not have a relationship with a financial adviser they can call or text to walk them back from the cliff,” said Jason Dorsey, president of The Center for Generational Kinetics, a research firm. “For many of them, it’s been a pretty rude awakening.”

Many millennials are familiar with debt because of their credit cards and student loans. But concepts like portfolio diversification and long-term investing are less well-known, experts said.

“If you haven’t been taught how markets truly work over time, and you don’t have the historical perspective, then bouts of volatility like this could cause you to make bad decisions,” said Brian Levitt, a senior investment strategist at OppenheimerFunds.

Many young investors were sanguine about the swings as the Dow Jones industrial average gained back 567 points on Tuesday after shedding a total of more than 1,841 points on Friday and Monday. On Wednesday, Wall Street edged lower; the Dow lost another 19 points, or 0.1 percent, and the Standard & Poor’s 500-stock index slipped 0.5 percent.

Paul Whited, 24, lost nearly $800 of the $12,000 in his portfolio as holdings in biopharmacy and technology stocks were walloped. On Tuesday, he made back $300.

The Knoxville-based accounting student began investing actively two years ago. His recent losses hurt, he said, but the volatility could present an opportunity to buy.

"Investing in stocks to secure a safe retirement is too important to let fear change my plans,” he said. “I have plenty of time ahead of me to earn my money back and then more.”

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