The Unconventional Ways Millennials Invest
The unrelenting volatility of the global and local market is expected to persist into the foreseeable future. This shaky scenario has been met with bearish sentiment – investment talk for the expectation of a downward price movement in the stock market.
Naturally, of these potential investors are a few millennials – young adults of 21 – 34 years of age. History shows that stocks give reasonable returns in the long run. However, it would seem millennials are far less keen on the stock markets than their predecessors.
While the older generation avidly participates in the stock market with a view to building up their personal wealth and securing their financial future. Millennials are far more opposed to risk, opting for cash investments as a safer alternative.
It’s not hard to see why most millennials are inclined to shy away from stocks. They have lived through two global stock market crashes – 1. The dot-com bubble of 2000 and 2. The global financial crisis of 2008.
Certainly, the distrust millennials have in the stock market’s propensity to provide returns from their investments is quite understandable.
On the other hand, this small percentage of millennials investing in stocks is also due to short-termism – a focus on short-term satisfaction to the detriment of long-term goals. As follows, a greater percentage of stock-invested older individuals is only to be expected, as they are preparing for retirement.
The Millennial Lifestyle
The millennial lifestyle is worlds apart from those of the older generations. Millennials stay single for longer and, in some cases, have children later, resulting in a higher disposable income. Millennials spend their disposable income to a greater extent on experiences, as opposed to accumulating assets.
Millennials eat out more frequently than generation X (35 – 49), Z (15 – 20) or the baby boomers (50 – 64). Millennials spend and save differently from these generations too. Baby boomers use their savings on houses and cars, while millennials save up for experiences.
This divergence away from materialism will absolutely see millennials investing in less conventional ways. Compared with older cohorts, millennials spend a lot more on products from companies demonstrating more sustainable traits.
Millennial Investment Patterns
Millennials are known for impact investing – investing in companies that not only amass profits but also produce appreciable environmental and social benefits. Millennials are selective about buying products from socially responsible and ethical companies.
They prefer companies that have a positive impact on society and advance their employees, while still recognising the money making agenda of businesses.
While older generations have a less holistic view of businesses, believing them to exist solely for the purpose of generating a profit.
Millennials are less likely to follow traditional ways of investing, such as approaching a financial advisor. They favour personal exploration of their options and the use of online research and services, like robo-advisors that provide automated algorithm-based advice.
Preferred Investment Options
Millennials are most interested in safe, low-cost investment options. A tax-free savings account allows for the selection of a product to suit their risk appetite and save them money.
Millennials should take advantage of the fact that time is on their side. Investing in the stock market is definitely preferable to not doing so – regardless of age.
The passing of time allows for the compensation of short-term stock market losses via the returns earned during the beneficial years and the power of compounding interest over time.