At 27, Nick de León knows firsthand about the gulf between millennials and Wall Street.

De León graduated this year from UC Berkeley with bachelor’s degrees in political science and rhetoric with plans to start law school soon, and he has an internship with a Superior Court judge in his hometown of San Bernardino. He’s also intrigued by the stock market.

But De León won’t be investing in equities any time soon. Saddled with $1,400 in monthly payments for student loans and for credit card debt from a failed business start-up, along with living expenses such as food, his phone bill and and car insurance, he’s temporarily living with his parents and working at Costco to make ends meet.

“There’s really no money for it right now,” De León said of the stock market. “I just don’t have the cash to even think about it.”


He’s not alone. Although the market is poised to close a banner year hovering near record highs, the rally hasn’t helped half of the nation’s millennials, who either lack the means to knock on Wall Street’s door or are wary of doing so.

In the last two years, an average of 49% of millennials (ages 23 to 38) held stock directly or through mutual funds, exchange-traded funds or retirement plans such as 401(k)s at any given time, according to polling data that Gallup provided at The Times’ request.

That’s down sharply from an average of 61% of Americans in the same age range in the 2001-08 period, before markets were hammered by the financial crisis of 2008-09, an event that’s still one reason many millennials steer clear of equities, analysts said.

Millennials, now entering their prime earning period, hold vastly less wealth than generations that preceded them. And the wealth gap between older and younger generations is widening. An analysis by the St. Louis Fed showed that in 1989, the median wealth of households led by people ages 65 to 75 was nearly eight times as large as the wealth of families headed by 25- to 35-year-olds. By 2016 the median baby boomer-led household had nearly 13 times as much wealth as the typical millennial household.


That’s in part due to the financial crisis that shaped the economy during millennials’ formative years — and the habits and fears they adopted at that time have, to some extent, kept them away from this year’s runaway market success.

“They’ve been tarnished by the damage that Wall Street did 10 years ago, and it’s in their psyche,” said Steve Nielander, a San Diego State finance lecturer and a partner at wealth management firm Cerity Partners.

As a result, they missed the market’s best performance in six years and the 11th year of the ongoing bull market that followed the crisis. Investors bid up prices despite the ongoing U.S.-China trade war, political turmoil surrounding President Trump and fears of an economic slowdown.

Investors instead focused on the economy’s continued expansion, rising corporate earnings, low unemployment, low inflation and the Federal Reserve’s decision to cut short-term interest rates three times in 2019.


The benchmark Standard & Poor’s 500 index has shot up 29.2% this year as of Friday’s close — on track for its biggest gain since 2013, when it rose 29.6%.

The Dow Jones industrial average is up 22.8% this year, and the tech-heavy Nasdaq composite index has surged 35.7%. Technology was among the market’s strongest sectors, along with financial, communications services and industrial stocks, according to S&P Dow Jones Indices.

Although stocks are risky investments, millennials who steer clear of them are missing potentially sizable gains during their peak earning years. The average return (price gains and dividends) of the S&P 500 index historically is about 10% a year, though its annual movements vary widely, as shown this year. Keeping money in cash, such as a savings account or money market fund, is safer. But the value and purchasing power of cash are eroded by inflation.

That’s one reason mutual funds and exchange-traded funds that mimic stock indexes such as the S&P 500 are popular among investors. They provide a passive way to invest in the broader market, often with less risk than trading individual stocks. But that distinction made little difference during the financial crisis that today’s millennials witnessed, when all manner of stock investing was devastated. In 2008, for instance, the S&P 500 plunged more than 38%.


Katherine Lovinger, 36, a North Hollywood biostatistician for a medical-devices maker, said she mainly invests in a diversified basket of exchange-traded funds, rather than individual stocks, but keeps the majority of her cash in savings accounts in part because she’s worried about the stock market’s outlook.

“I understand growth is very small with [savings] compared with the stock market, but I don’t trust that the growth in the market is going to continue,” she said. “My best guess is that within the next six to nine months we’re going to see, if not a full crash, at least a guaranteed slowdown.”

A stock market dive could contain a blessing for young people who have a long-term investment horizon: It would create an opportunity to plow money into stocks when prices are low.

But many analysts say high prices alone shouldn’t be a barrier to buying stocks. One technique for investing without being afraid of entering at a peak is to use dollar-cost averaging: buying the same dollar value of the same set of stocks at regular intervals, on an ongoing basis, regardless of where the market stands. That way the investor ends up buying more shares when prices are low and fewer when they’re high.


It’s not just millennials who are less enamored with stocks than before the financial crisis; Americans in general have been less invested in equities since then. Over the last two years, 55% on average of the adult population owned stocks directly or indirectly, down from 62% before the crisis, said Jeff Jones, a Gallup research analyst.

In the 18-to-29 age group alone, stock ownership averaged 37% the last two years, down from 42% before the crisis, he said.

In response, the nation’s major online brokerages and some digital trading upstarts are making a push to attract more younger clients.

Charles Schwab Corp. said in October that it was eliminating trading commissions, and others such as E-Trade Financial Corp. and TD Ameritrade Corp. did the same. Then, Schwab announced last month that it was acquiring TD Ameritrade for $26 billion in stock.


Schwab also announced in October that it would let investors buy and sell fractions of stock. That enables younger investors in particular to trade a piece of, say, Amazon.com Inc., even if they can’t afford to buy full shares of the company, which closed Friday at nearly $1,870 apiece.

Competitors such as online brokerage firm Robinhood Markets Inc. likewise offer zero commissions, fractional ownership and mobile apps. Robinhood says it now has 10 million customer accounts.

Robinhood co-founder Baiju Bhatt — himself a millennial — has said his company was created with investors his age in mind. “We had seen how the younger generation had felt really frustrated, disenfranchised with the way that the system worked” after the financial crisis, “and we saw an opportunity to build a product that really spoke to that generation,” he told CNBC’s Jim Cramer this month.

For Schwab, attracting millennial investors now is key because millennials and the preceding Generation X will inherit a “massive” transfer of wealth — estimated at $30 trillion or more — from their parents and grandparents in the coming decades, said Joe Vietri, a Schwab senior vice president who heads its branch network. “It’s a huge opportunity for us,” he said.


Once the relationship is established, Schwab — which also operates a bank — hopes the customers who were first attracted by the zero commissions or fractional ownership eventually will pay for fee-based services such as investment management, banking services and retirement planning.

Connecting with millennials requires “a different approach,” Vietri said.

That involves understanding how their finances differ from those of older generations. Nearly half of Schwab’s millennial clients have student loan debt. Americans’ total student debt load has mushroomed to $1.6 trillion as college educations jump in price, and analysts agree that burden is another reason many millennials aren’t investing in stocks. So is the high cost of housing in certain urban areas, combined with the fact that people in their 20s often don’t yet have the earning power to invest part of their income in stocks.

Vietri said millennials also place an “abnormally high” premium on low costs, ease of online or phone-app transactions and strong security against hackers.


Millennials have shown they’re comfortable with certain financial technology, such as using digital payment apps such as Venmo, and even high-risk investments: Some buy and sell bitcoin and other cryptocurrencies. But when it comes to the stock market, their wariness remains evident.

As the market was moving up one day recently, CNBC’s Cramer tweeted: “Younger people please start investing now! dollar at a time...” The remark drew some skepticism.

“Invest at all-time highs?” one Twitter user responded. Another said he was 33 with school loan debt, adding: “This is a valid reason as to why my generation is struggling to invest.”

Bankrate.com did a survey this summer asking millennials what they believed was the best investment for the next decade. The top response was real estate, at 36%, while cash and savings accounts were 18% and the stock market was 16%.


Still, millennials also lag behind preceding generations when it comes to buying a home. A study by the Urban Institute found that the homeownership rate for millennials in 2015 was 37% — eight percentage points lower than the rate baby boomers and Gen X had at the same age.

Mark Hamrick, Bankrate’s senior economic analyst, questioned whether the brokerages’ move to zero commissions would make much difference in attracting more young investors to stocks. After all, he said, commissions already had been tumbling in price in recent years and millennial stock ownership still fell.

“The elimination of commissions doesn’t do a lot for those individuals who are essentially scared out of their wits by their fear of what happened in the sell-off a decade ago,” Hamrick said.

Older millennials also remember the dot-com crash of technology stocks in the early 2000s, which means they’ve witnessed two huge market plunges “in a 10-year period, and that’s never happened before,” Nielander said.


“These people grew up and watched that, and saw the pressure on their parents of losing money in the stock market, losing their homes and seeing the mass distrust of Wall Street,” he said.

Vietri said Schwab encounters that fear with millennial clients. “When you see your parents or others go through that type of adversity, it does have a lasting effect,” he said.

Nonetheless, he said efforts to attract more millennials — efforts that include both helping them pare debt and invest, among other strategies — are starting to pay off. Vietri said 57% of Schwab’s new retail clients this year were younger than 40, and that percentage “is definitely on the rise.”

Schwab provides one snapshot of how millennials invest by surveying its clients who have self-directed 401(k)s and other retirement plans, meaning they can choose investments beyond the typical core investment choices provided with such plans.


In the third quarter of this year, Schwab found that all generations allocated the largest percentage of their portfolios to mutual funds and individual stocks. For millennials, 34% went to mutual funds and 25% to stocks. But millennials allocated more to exchange-traded funds and cash (24% and 16% of their portfolios, respectively) than other generations, the survey shows.

Millennials’ modest appetite for stocks will be tested if the market turns south in 2020, and there are questions about whether stock prices will keep rising if economic growth slows, the U.S.-China trade fight worsens or concerns mount about how the presidential election will affect the markets.

The market also is getting a bit pricey, which might lead to a pullback. The S&P 500 now trades for about 18 times its component stocks’ average earnings per share, up from 15 early this year, according to FactSet, and that’s also above its historic average of 15.5 to 16.

But Hamrick said everyone knows that a downturn is to be expected — if not next year, then later — and that the bull rally won’t last forever.


“As with a recession, it’s not a question of whether the market will turn lower, it’s a question of when, along with the depth and duration” of that decline, Hamrick said.

Whether that will grab the attention of millennials such as De León is questionable. When talking to his friends, he said, the stock market “just doesn’t come up.”