Millennial Investors and “Paper Losses”

Did you know that 1/3rd of Millennials save more than 10% of their income?  To put that in context, the national savings rate is currently about 6%.

We do a better job of saving, but a worse job (compared to older generations) of investing those savings.  We know inflation will eat away at our savings, but it’s only 2%.  But that’s double the rate you get on an Ally savings account, and that’s pretty much the best interest rate on ANY savings account.

Whenever this topic comes up, it’s all about figuring out the reason why we aren’t investing.  The most common answers are:

  • Underemployment/low pay
  • High student loan debt
  • Rising costs in education, healthcare, and housing
  • Shell shock from the Great Recession
  • YOLO!

I’m sure all of these are likely causes.  Even the last one.

But it doesn’t explain why people, especially a generation that saves more than previous ones, is hesitant to invest in the stock market.

Maybe it’s the options.  On one hand, thanks to the internet we can all trade shares of companies all around the world in an instant, just like the pros.  On the other, there are hundreds of investment firms and thousands of funds out there.  A hundred different portfolios and active or passive and dividend or growth – it’s all a bit much.

Yes, there’s the wise advice to stick it all in a Vanguard/Fidelity index fund and let it sit, and I’m sure that’s what a few of us are doing?

Or maybe it all comes down to fear: the most powerful emotion.


I would gather that most people think investing in the stock market is risky.  I agree.  There are ways to hedge against some of the risks, but not losing money is no guarantee.  Risk means the potential for loss.  For most of us who lived through 2007-2009, losses were everywhere.

People lost their jobs, their homes, and their life savings.  Plenty lost the will to live.  Some lost hope in the American Dream, while others lost hope in America itself.

If Safety and Security are the second most important needs, then you could say that losing those things is our second biggest fear.*

Thanks to Capitalism, our safety and security is primarily tied to one thing – money.  With enough money, we can accommodate our basic needs (the bottom 2 levels on Maslow’s hierarchy).  We buy food, water, warmth, shelter, and rest (in the form of savings to pay for our needs when we’re not working).

Once we’ve met these needs, we understand that we need money to maintain them.  Without it, we risk losing the ability to meet them.  Consider that the downside of that risk is our two biggest fears (death and insecurity), and you can easily see how losing ANY money (or the source of it) makes us queasy.

And all of this has to do with investing how?


Earlier I tried to get at why people (and more specifically higher-saving Millennials) stay away from investing.  I think the simple answer is they are afraid of loss.  There is a risk of losing money in the stock market, and losing money is the same as losing the ability to meet your basic needs.

But!  But!  We get over fears all the time!

I have a hard time talking about investing In Real Life.  It always gets confusing around the part where I mention how you haven’t technically made or lost money until you sell.

Aka, Paper Gains and Losses.  Except we should probably call them Pixel Losses (see below).

And it’s true.  Even if your account balance goes down with the market, you still have the same number of shares.  As the market climbs, the value of your shares will climb back too.

But on every account home screen of EVERY financial institution, they don’t show you how many shares you have.  No.  They show you how much your shares are worth at this very moment.  It’s good to know exactly how much money you have in your checking account.  That’s some personal finance common sense right there.

But it’s terrible to know exactly how much you have in investments.  That home screen is real.  Those numbers are real.  We can see them.  That’s how much money you have TODAY.

Pixel Losses Are Worse Than Paper Losses

I love Personal Capital just as much as the next net worth obsessed individual.  But we need to take a moment to consider if having immediate access to this data is helping us or hurting us.

The idea of paper losses comes from back in the day when you would get a monthly or quarterly statement for, say, your 401k.  You’d have your contributions, dividends, and rate of return.  All things you can find on your Vanguard/Betterment/FIdelity/Personal Capital home screen.

Except you only got to see these things a few times a year.  And you were probably saving for retirement over several decades.   These two factors drive home that investing is a long term game.  Several years long.  

Today, we can check how our investments do after every single day of trading.  Do you know how much the market swings back and forth day to day?  Week to week?  Month to month?  All it takes is a tweet, a natural disaster, a tweet about a natural disaster to upset the markets.  Eventually they even out.  But it’s hard to see things even out when you look at your balance every single day.

Pixel losses feel a lot more out of our control.  They’re happening RIGHT NOW and WHAT CAN WE DO ABOUT IT?

And even if you’re good and live your life without worrying about what your 401k is doing, it’s still hard to reconcile the difference between real and fake money.  It’s real in that it took real hours of your life to accumulate it and could could withdraw most of it.  It’s not real in that it fluctuates on plenty of things that are out of your control.  Over time, it tends to fluctuate upwards.  Those fluctuations are pretty real when you’re just looking at a dollar amount.

We might not learn a lot about money, but one thing that gets ingrained in us is that what comes after that dollar sign is how much money you have.  

We learn it when we’re very young.  Maybe our first piece of money knowledge.

Add in a super tech savvy generation entering their better earning years and the growth of Fintech (financial apps and programs), and it becomes clear we have some information overload.  In this case it’s bad for us.

For Millennials, perhaps the best advice is to remember some of the things that have always been true about investing:

  • Success comes from patience over the long term
  • Most successful investors are successful savers first.

We seem to have the saving part down.  I for one have deleted the stocks app on my phone and make it a point not to check my investment accounts but once or twice a month.  I also wrote out a Financial Plan/Investing Policy Statement, which helps with the whole “set it and forget it” approach I think we NEED to take here.


*On Maslow’s hierarchy, only food, water, warmth and rest are below safety and security.  A loss of those is a loss of life itself, and dying seems to be most people’s biggest fear.

4 thoughts on “Millennial Investors and “Paper Losses”

  1. It’s good to see that Millennials are saving more on average. I mean, it makes sense, granted that we grew up during the Great Recession and saw how it can destroy your finances (and even your life). For me, it was always about not knowing *how* to invest. I love that apps are out now that can make micro-investing easy and automatic. It’s a good start to seeing the power of compounding.

    1. I agree it’s a hard thing to picture – especially when your only experience has been with a savings account (likely earning .01% interest or something like that!). And while I usually side on “saving is harder than actually investing your savings”, I can’t ignore the fact that the market has been very good the last few years and once that gravy train ends it will be rough for a while – at that point I think watching your account values fluctuate (or decline) would probably be more emotional.

  2. Plenty of reasons to be ‘scared’ but for me, I’m more scared of NOT having my money work for me, and being forced to work for the rest of my life. The only way to get there is through investing in SOME way, and that is far less scary than the alternative. 🙂

    Like you said, losses are only real when you sell; otherwise it’s paper (pixel) losses. If you can ignore those then you’ll be more emotionally able to stomach a paper loss. The worst thing to do is to make a paper loss a real one by panicking, especially in something like an index fund which is virtually guaranteed to bounce back (or else we’ve got other major socioeconomic issues to be concerned with)

    1. Yes! I guess it’s living in a constant state of FOMO, where I constantly look back and am like “I wish I would have invested more”, even if it was just a few months ago. Right now we’re saving up for a house, so I’m diverting a lot of extra funds into a savings account, and it kills me a little bit inside earning only 1.xx% interest instead of possibly 8 or 10%.

      I agree about the bouncing back – I tell myself the same thing when I worry about what a crash would feel like – and then I just tell myself that if stocks become completely worthless, I’m probably thinking about pure survival instead of safe withdrawal rates at that point 😉

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