For years, investors have been told to take on the most risk in their youth, when they are least likely to need to access their savings. For a young person invested heavily in equities, for example, a big dip might represent only one dramatic chapter in the story of their portfolio because the market should have time to recover long before their retirement.

Whether or not that advice is still sound, a new study shows young investors are no longer buying it. In fact, many young people are starting to resemble their grandparents in their appetite for risk.

A recent Merrill Lynch survey of affluent investors found that more investors under 34 described themselves as having a lower tolerance for risk than those in any other age group, except for people over 65, 87% of whom were retirees. Young investors were also more likely to say their risk tolerance had fallen over the past year than investors in any other age group.

Financial planners say this loss of appetite for risk among the young isn t surprising. Investors in their early 30s may have lived through the dot-com bust, but weren t likely to have had substantial assets in the market, so this is the first serious correction they ve experienced, says Michael Kresh, a certified financial planner and the president of M.D. Kresh Financial Services.

Their emotional reaction is natural, but it can be dangerous, says Dean Athanasia, the head of Bank of America s Global Wealth & Investment Management Banking and Merrill Edge, who worked on the affluent investors survey. You cannot be wholly in cash and achieve your goals in a balanced way, Athanasia says. You can doubly hurt yourself by pulling everything out at the lowest point and by not investing enough when the market starts to go up, he says.

The danger for risk-averse young investors is that focusing too much on short-term market volatility could blind them to other risks like outliving their savings. If you die early, that s fine, Harold Evensky, a certified financial planner and the president of Evensky & Katz, says of overly conservative investing, but God forbid you keep living.

Young investors not sufficiently invested in stocks risk not only missing out on gains but also failing to keep pace with rising prices. A fixed-income investment returning less than 3% will not keep up with inflation, based on historical rates, says Richard Barrington, a personal finance expert for MoneyRates.com. Many investors are shocked when they first calculate how much inflation hikes the annual income they ll need to maintain their current lifestyle 30 or 40 years from now, Barrington says.

Of course, that doesn t mean young investors should throw all their money into the stock market to chase returns. Young investors should start by building up an emergency fund and paying down debt, Kresh says.

A good rule of thumb is never to risk money that ll be needed in the next five years, Evensky says. A young person who s planning to buy a car or home in two years, for example, should keep that money in a CD so they feel comfortable investing their remaining cash for the long term, Evensky says.

The recent market crash offers a lesson in how to evaluate long-term investment options, Barrington says. For example, when assessing a range of funds to choose from in a 401(k), investors should look beyond the aggressive or conservative labels and make sure they understand the strategy behind each option, he says. Investors should also look beyond one-year or even five-year returns in evaluating a specific fund or money manager, and focus on performance in bull and bear markets, Barrington says. Do a little bit of digging into the history. Don t just buy performance, understand how the returns were earned, he says.

Focusing on the long term can be difficult when markets are volatile. Evensky says he advises clients who are worried about risk to turn off their TV and stop paying so much attention to daily market moves. In sharp downturns, he counsels clients to downplay short-term movements in an index fund and think instead about the individual companies that make up that index the Apple, GE, and Walt Disney that make up a 401(k) portfolio. Stock prices rise and fall, but five years from now those companies will still exist, Evensky says. That s why it s so important not to have to sell at the wrong time, he says.

Young investors also should study market history to get a sense of the natural ups and downs that come with market cycles, Barrington says. Anything else in life, you accumulate a certain amount of experience that helps you make better decisions, but with saving for retirement, by the time you ve accumulated enough experience, you may have wasted a lot of time and money out of your retirement saving years, he says.

Focusing on basic advice about overall asset allocation principles will be more helpful than trying to stay up to date on the latest hot investment strategy, says John Scherer, a certified financial planner with Trinity Financial Planning. Picking the best investment vehicle, with solid performance and low expenses, is important, but simply saving and investing at all is the most vital step in preparing for retirement, Scherer says.