The past 10 years have perpetuated many unfounded myths about millennials, including that they’re lazy, entitled, overly sensitive, self-absorbed and killing traditional industries. Studies have shown time and time again that there’s no real data to back up these myths and, now that millennials hold a significant amount of purchasing power, people are starting to have a more realistic overview of what they’re actually like.
Just like the previous generations, millennials are a product of their times and, while their needs may not be that fundamentally different from their parents and grandparents, their priorities are in a different place. Millennials shop differently, interact differently, travel differently, and now, invest differently.
In the near future, Baby Boomers are expected to make the greatest wealth transfer in American history ($30 trillion), and getting to know millennial investment habits is key in understanding how this money will be allocated in the following 10 to 30 years.
Millennials become investors earlier than their parents
In the past, it was uncommon to see someone younger than 40 dabble into investment territory, simply because the field was inaccessible to newcomers. The high barriers to entry lifted, the current investment landscape is now much more beginner-friendly, and, according to a recent study, 85% of millennials don’t feel like they’re too young to invest. In fact, the average investment age among Millennials is 28. Additionally, 7 out of 10 Millennials are active investors and report net earnings of about $2,500.
Another study found that this generation is also interested in online trading, with millennials accounting for over 58% of all online traders. At the same time, the number of traders over the age of 45 has gradually declined. The widespread adoption of online trading isn’t exactly surprising, considering that millennials grew up with the internet, and they’re highly receptive to things like crypto and Forex. Familiarity with technology is also the main reason why 58% of those who invest choose tech companies. In the second place is energy, with 37%, followed by healthcare, with 34%.
Where do millennials learn how to invest?
Low barriers to entry have made it possible for young investors to penetrate the market and gain access to financial instruments that were completely out of reach during their parents’ generation. Unlike a few decades ago, information is much more widely available, and anyone who wants to invest their money wisely has educational resources at their fingertips. Apart from real-world mentor advice and books written by experienced investors, millennials also have a valuable tool that wasn’t around in the past: social media. Following global economic trends has never been easier, and anyone with a smartphone can connect to the latest investment trends from an early age. In fact, more than half of millennials said that they learned their first investment practices before they turned 15.
The past few years have also seen the rise of an online niche called online social trading, where beginner traders without much experience and trading capacity copy the trades executed by professionals. The best social networks for Forex traders work like a passive investment vehicle for beginners, allowing them to grasp basic trading notions and minimize initial losses. Then there are demo accounts, which allow users to practice without losing actual money. Combined with the hundreds of online communities and specialized online investment magazines, this has favored the development of a broad educational environment where people of any age can learn how to put their money to work.
But, even with this plethora of information, the majority of affluent millennials don’t feel knowledgeable about investing and declare that they have much more to learn. According to Investopedia’s Affluent Millennial Investing Survey, only 37% of millennials are fully confident in their investment skills, which is why they turn to conservative options such as bonds and low-yield savings accounts. Statistically, affluent Millennials are less likely than affluent Gen Xers to own stocks.
The same Investopedia survey also showed that millennials still trust financial advisors. Around 43% of affluent millennials reported collaborating with an advisor, and 27% of those who do said that they’re very satisfied with how their portfolio is doing. Apart from the expertise, they appreciate the personal connection of working with someone experienced, learning the ropes from them and gradually gaining the confidence to develop personalized strategies.
Retirement savings aren’t a priority
According to the 18th Annual Transamerica Retirement survey, only 45% of millennials have prioritized saving for retirement; that doesn’t really come as a surprise, considering that millennials are currently the generation most affected by debt. Around 67% of people aged 23 to 38 said that they wanted to pay off debt as quickly as possible and then focus on other forms of investment. Statistics show that millennials are mostly worried about credit card debt, followed by student debt, mortgages and car loans. A report from Merrill Lynch Wealth Management even revealed that 60% of American millennials view financial success as not having debt, not as being rich per se.
Entrepreneurial spirit and the desire to help the community
When they don’t invest in stocks, millennials show entrepreneurial spirit. Compared to their parents, who preferred working for the same employers for decades and climbing the corporate ladder, millennials are willing to take financial risks and start their own businesses. Because they have many decades ahead of them, they accept the idea of losing money now if there’s a chance that it will be worth it in the future.
When they do invest in stocks, however, millennials have a different system of values and consider other things apart from how much a stock is worth. More specifically, they want to know what companies they are supporting and whether they can make a positive impact on the world. As a result, ethical funds have performed better than their traditional counterparts in the past 10 years, turning impact investing from a niche into a powerful strategy that’s currently worth $502 billion. In the future, millennials are expected to drive impact investing even further, increasing its popularity.