Young investors may accept the argument that those who begin investing when stocks are cheap end up with more retirement money, but after the turmoil of the past year, some find it hard to put their money in the market.

Asset managers and analysts say that those who invest in rock-bottom stocks of a bear market will see share values rise for decades.

But many in their 20s and early 30s are not buying rosy projections, due to immediate financial pressures and exposure to the longest recession since the 1930s Great Depression.

I would keep all my money in cash, said Alex Corbacho, a senior at Boston University.

The trend has some worrisome long-term implications. Stock brokers may find themselves largely shut out of a big customer base, and demand for equities will likely be crimped as investors favor safer havens, hurting the stock market's prospects. It's also unclear whether these young investors will have accumulated enough to fund their retirements when the time comes.

Corbacho is no stranger to markets. At age 13 he invested his birthday money and a matching donation from his father, $1,000 in total, in tech stocks only to feel the sting when the Internet bubble burst.

He carried the lesson with him in early 2008, after seeing signs of economic trouble as an intern at a Boston investment bank. He put the majority of his stock investments, which had reached about $5,000, into a certificate of deposit instead.

Corbacho doesn't plan returning to stocks for a few years after graduation and is instead focusing on saving.

The recent market collapse has made holding cash for immediate expenses far more attractive to young people than investing, said Rodger Smith, managing director of Connecticut consulting firm Greenwich Associates.

They are taken aback by how much they lost and how quickly they lost it, Smith said.

The early exposure to such dramatic declines could restrain many from investing aggressively when they are older and have accumulated more money to put into the market, some say.

Asset managers, financial advisers and investors agree that young people will emerge from the financial crisis more educated, and more cautious, about managing their money.

I do think they are taking a more practical and slightly more conservative view of the world, said Michael Doshier, vice president of Fidelity's Workplace Investing Group.

Corbacho said his generation should not expect to accumulate sudden wealth like some in the past.

We might be a little smarter and a little wiser moving forward. We will have been more conservative and more observant and won't have 65 percent of our life savings invested in equities, he said.

Assets in U.S. retirement plans fell 22 percent in 2008 or nearly $4 trillion, with almost 75 percent of the drop in the second half of 2008, the Investment Company Institute found.

These folks need to be resold on the idea that a 401k is a long-term investment, said Smith, who oversees a profit-sharing plan for his firm and advises younger investors.

LONG-TERM CONCERNS

Financial advisers have long suggested that those further from retirement invest more heavily in equities, then switch to less risky assets as they near their golden years.

But the portfolios of those in their early 20s don't reflect that advice. At Fidelity Investments, those 20-24 years old invest 31 percent of their 401ks in equities, compared to those 50-59 years old with 35 percent equities investments.

Overall, those saving for retirement have pulled back from stocks. In June, 48 percent of all Fidelity 401k participants were in equities, down from 53 percent a year ago.

Those in the investment industry say young investors should buy stock early and often.

The key message is that it's not a bad time for everybody, said Christine Fahlund, senior financial planner at T. Rowe Price.

Ita Mirianashvili, a 35-year-old fellow at Massachusetts Institute of Technology's Sloan School of Management, has confidence in long-term stock market prospects.

I know the downturn cycle we are in will continue for some time but it will come back, she said outside a MIT class that simulates a stock trading room.

But concerns about inflation, heavy government spending and rising bankruptcies has left many young investors uncertain.

It's still difficult to be bullish ... for the long-run, said Ashan Walpita, a 2009 Boston University graduate and former president of the school's finance club.

Other short-term obstacles may hold young investors back. Employer-sponsored retirement plans often give people their first market exposure but with many graduates not finding work, they are yet to get started on making investments.

(Editing by Mark Egan and Cynthia Osterman)

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