Who are millennials anyways, and what makes us so different?
Millennials are the roughly 80 million Americans born between the years 1980 and 2000 (ages 15-35). Our world views, attitudes and tendencies have been shaped by two decades of dramatic changes in technology and communication as well as the worst financial crisis our country has seen since the great depression of 1929. We are the trailblazers of social media and mobile communication. There is no doubt we communicate and gather information differe
ntly than our parents’ generation. Therefore, it comes as no surprise that millennials approach investing differently than generations in the past.
Scarred by the Great Recession
We’ve all heard stories of grandparents who lived through the great depression and keep cash or gold tucked away under their beds out of distrust for banks and the financial system. While 2008 wasn’t as severe as the great depression it still caused similar fears among the generation that grew up seeing family or friends foreclose on their homes, or loose their jobs and retirement savings. A Money Pulse survey shows that only 26% of adults under the age of 30 own stocks, compared to 58% of investors 50 years and older. In addition a U.S. Trust report found that 51% of high net worth Millennials fear they will lose money in the stock market while 64% said they were more comfortable investing in physical assets rather than stocks. In addition the financial crisis crippled the labor market for young people, making it harder for young people to find well-paying jobs and invest.
Leveraging Online Tools
For millennials who are willing and able to invest in stocks, their approach is unique due to their familiarity with technology and the internet. We have grown up in an Information Age where the answer to any query is right at our finger tips. “Just Google it” and the answer is just a click, swipe or tap away. The internet has made information more accessible then ever thus making it easier for individuals to make more informed investment decisions. Millennials leverage the power of social media to find stock picks, and gain investment insights. Platforms like StockTwits and Twitter have made ideas and information flow more efficiently in the markets and young people understand how to take advantage of these platforms. Apps like RobinHood, allow clients to trade stocks completely commission free. The average user of RobinHood is about 27 years old as opposed to a more traditional online broker like Charles Schwab whose average client is in their 50’s. The chart below shows that millennials surveyed are significantly more likely than their elders to use online tools for investing.
Millennials want to be invested in companies that have a positive impact on society. Impact investing refers to investments made in companies that put capital to work in a socially responsible and sustainable manner. Stocks like SolarCity (SCTY), Tesla (TSLA) and Whole Foods (WFM) are appealing to younger generations because investing in those companies is a way to make a difference while gaining financial returns. The chart below shows that Millennials are more willing than other generations to take on more risk and less return in companies that reflect positive values.
(Source: Motif Investing)
Rather than simply donating to a charitable foundation, millennials see impact investing as a way to profit from companies that have a positive impact on society or the environment. While impact investing is not exclusively for young people, many experts believe millennials will be the ones to bring this trend mainstream.
While it’s clear that not all Millennials are fully willing and able to participate in the stock market, those that are are able to invest, go about it in a unique way. Our familiarity with technology allows us to utilize online resources and mobile apps when making financial decisions and investing. When making specific investments we tend to gravitate toward companies that have a positive impact on society and the environment. Fintech startups and financial advisors look to better understand these trends to be able to adapt and serve the needs of this new bread of investors.