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New Sign of Market Confidence: Savers Get Riskier

Big Data Download

Retirement account holders have been willing to take on more risk in hopes of better investment returns, indicating improved confidence in the market, recent research finds.

Retirement savers had $3.6 trillion in their 401(k) plans in 2012, up from $2.2 trillion by the end of 2008, according to a recent report from the Investment Company Institute, an investment firm trade association.

Young savers in particular, many of whom joined the workforce during the economic downturn, were initially more conservative as they started investing for retirement. But they're starting to invest more heavily in equities.

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"So if you think about young investors, their introduction to investing is usually through their 401(k) and they started working at a time when we've had some pretty scary stock market results. So they've said they're less willing to take financial risk," said Sarah Holden, retirement research director at the ICI.

In 2007, 19 percent of investors in their 20s held no stocks compared with only 9 percent currently holding no stocks at all, Holden told "Big Data Download."

Last year, about 62 percent of investors in their 20s had 80 percent or more of their 401(k) holdings invested in equities, according to the ICI. That compares with 48 percent of twentysomethings invested as aggressively in 2007.

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The ICI collects data on 24 million 401(k) holders in collaboration with the Employee Benefit Research Institute and surveys account holders on their savings and investing habits.

Part of the increase in aggressive investing among young 401(k) holders is due to increased use of target date funds which target a specific retirement year, Holden said. Those funds' managers adjust investment risk over time as investors in those funds get older.

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