Markets are near all-time highs, but lots of young investors are sitting out the rally, owed in part to their glass-half-empty perspective of the economy. A recent study by Ernst & Young and the Economic Innovation Group found that the cohort born between 1982 and 1998 is still deeply affected by the stock market crash in 2008. The emotional baggage is leading to some poor investment decisions.

Millennials can benefit from some behavioral finance 101, a mash-up of psychological theory and finance that aims to explain how investors make decisions, especially bad ones. Behavioral finance expert Meir Statman, a professor at Santa Clara University, says fear is a natural response to negative events, and it can linger for years.

By: Crystal Kim, Barron’s

Read the full article here.

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