The global financial crisis and the increasingly unaffordable housing market have sapped younger investors' appetite for risky investment, analysis shows.

The proportion of Generation Y - often defined as those born in the decade or so after 1980 -  who treat investing as a hobby dropped to just 7 per cent in 2009, from 30 per cent in 2008, according to the RaboPlus Generational Findings survey.

This collapse in interest in investment marks a significant shift for a generation that until recently had only known a rising sharemarket, a strong economy and low unemployment.

''There's a case of fear factor in terms of their experience within the market,'' said RaboPlus senior investment manager Tim Hewson.

For Generation Xers - those born in the decade or so before 1980 - the proportion of those investing for a hobby dropped less steeply to 14 per cent in 2009 from 18 per cent the year before.

The generation or so born earlier - the Baby Boomers - remain a driving force in the investment. The Boomers, who masterminded compulsory superannuation and popularised shareholder culture, have been less deterred by the market turmoil of the past two years. In that bracket in 2009, 12 per cent continued to invest as a hobby, only marginally fewer than the 13 per cent recorded in 2008.

''Compared to Baby Boomers, who are more consistent in their approach based on their well-held experience, this is potentially the first foray into the markets for a lot of Generation Ys," Mr Hewson said.

The RaboPlus survey is based on an online questionnaire of 503 respondents actively managing holdings worth $150,000 or more in personal savings, including superannuation but excluding homes.

Melbourne University finance lecturer Sean Pinder said one of the major factors shaping Generation Y's investment behaviour is the need to build up a down-payment for a home in an unaffordable housing market.

Generation Xers mostly have mortgages, Professor Pinder said, so the money they are investing with is for long-term investments and returns.

''Generation Ys are still striving to make that (housing) deposit,'' he said. ''So naturally, their level of risk aversion, has to be lower," Professor Pinder said.

"Generation Y has faced really tough market conditions with a tough rental market and an unaffordable buying market.''

The First Housing Affordability Index dropped more than 5 per cent in the June quarter, according to the Housing Industry Association-Commonwealth Bank.

The median house price rose to $419,900 in the June quarter, from $386,400 in the March quarter.

Generation Y, defined as those born in the early 1980s to the early 1990s, showed less appetite for risk in the RaboPlus survey with 21 per cent of that age group in 2009 saying they were willing to take risks if there may be a high return, down from 35 per cent in 2008.

The drop-off compared to a 29 per cent of Generation Xers reporting the same in 2009, nearly unchanged from 30 per cent in 2008. Baby Boomers willing to take risks increased to 17 per cent in 2009, from 16 per cent in 2008.

Sharemarket plunges at the end of 2008 and 2009, triggered by the global financial crisis, have prompted more caution from individual investors nearing retirement, as well, the report shows.

Baby Boomers who defined themselves as ''cautious and conservative'' rose to 36 per cent in 2009 from 24 per cent in 2008. Generation X investors in this category were unchanged, falling to 23 per cent in 2009, from 24 per cent the year earlier.

Generation Y investors calling themselves ''cautious and conservative'' rose to 41 per cent from 30 per cent, the report shows.

Mr Hewson said expects Generation Y investors to gradually reconsider their investment options as time progresses and embrace more risk-sensitive allocations.

''You would expect a more aggressive shift from Generation Y over a long period of time,'' he said.

''They're unhappy about the way they've invested. They're unhappy about their experience, but it's making them more responsible, making them do their research, and going to more trusted and professional resources.''

czappone@fairfax.com.au

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