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Philip Belayneh has heard all the arguments about the benefits of compound investing, especially for millennials who have plenty of time to sock away money for life's big milestones.

Still, Mr. Belayneh has about $25,000 – or roughly half of his wealth – in a bank account right now, generating about $10 of interest a month. "I could've invested it," says Mr. Belayneh, 26, of Brampton, Ont. "My concern is about how quickly the market can turn around."

He points to the steep drop in shares of loyalty program operator Aimia Inc., which lost two-thirds of its value in one day last month, as an example of how quickly money invested in the market can disappear.

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"That's exactly the reason why I don't invest [all of my money] in the stock market," Mr. Belayneh says. "If I invested in something like Aimia, I would've lost a chunk of my retirement savings in a few minutes. That's my No. 1 concern."

Mr. Belayneh's investing fears aren't uncommon, especially among millennials. Experts say some are spooked by the markets, having come of age during the 2008-09 financial crisis and either experiencing financial loss or watching their parents lose money. They're also turned off by corporate wrongdoing they've studied or read about in recent years, including the Volkswagen emissions-cheating scandal and accounting scandals at companies such as Enron Corp. and WorldCom Inc.

"They've grown up with the fact that corporations will screw you, so why invest in them?" says Mary Donohue, CEO of Donohue Learning, which specializes in on-demand learning for generational communication and management.

She says millennials, perhaps more than any generation before them at this age, value trust in corporations. It's why they're picky about where they spend and invest their money. "They're smart and conservative," Ms. Donohue says.

A recent U.S. survey from investment managers Legg Mason shows that 85 per cent of millennial investors describe themselves as conservative investors. In fact, 52 per cent say they're "very conservative," compared with 30 per cent of Gen Xers, 29 per cent of baby boomers and 28 per cent of investors over age 65.

Many millennials are similar, in some ways, to their great-grandparents when it comes to asset allocation, Ms. Donohue says. "[Because of the Great Depression], they kept lots of money in cash, in bonds, and in very safe investments. They didn't trust the stock market."

In the case of Mr. Belayneh, he has some unrealized losses in an energy mutual fund he owns, as a result of the downturn in Canada's energy sector in recent years.

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"If the fund ever recovers, I'll likely never do it again – something that's so geared towards a risky industry," Mr. Belayneh says. (He also has some funds that have done well.)

Mr. Belayneh doesn't plan to deploy the $25,000 in savings for about seven to 10 years. The money is earmarked as a gift to his parents to help pay off their mortgage. Any funds left over will be invested in the market, either in individual stocks or different types of funds.

Jason Heath, managing director at Toronto-based Objective Financial Partners Inc., says not all millennials are risk-averse, of course, but understands why some could be in the aftermath of the financial crisis.

"Macroeconomic events that happen during one's formative years can have a big impact on a lot of things, including investing," says Mr. Heath, whose firm offers advice-only financial planning for a fee.

That said, he also sees some millennials who are too aggressive, either because they've forgotten or are unaware of what happened in the markets nearly nine years ago. Mr. Heath recommends millennials find a balanced investment approach, but cautions against being too conservative, given their longer time horizon until retirement.

"Being too conservative means you need to save that much more and spend less in the long run," Mr. Heath says. "The power of compounding is a big deal and a big thing … Now, more than ever, conservative investors are being penalized. With savings accounts, GICs and bonds barely keeping up with inflation, stock exposure is that much more important."

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Mr. Heath says Canadian bonds and stocks have both returned about 8 per cent annualized over the past 30 years.

"So in retrospect, a conservative investor may have earned a return similar to an aggressive investor over that time frame. Over the next 30 years, that most certainly won't be the case, with bond yields near historic lows," he says.

"I suspect the difference between the return of an aggressive investor and a conservative investor over the next 30 years may be more extreme than almost any other 30-year period in history."

Personal finance editor Roma Luciw tells you what you should be doing with your money if you're never going to be a homeowner.
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