Much of the news we hear right now is negative. It includes the coronavirus, civil unrest, and man-made or natural disasters. One would think the stock market would pull back from its record highs. And while there were some noticeable dips in the immediate aftermath of the pandemic, it seems like the markets continue to do well despite what is going on in the world.
Millennials have played a pivotal role in this. Millennials lack the same fears that previous generations had. Their consumer preferences are drastically different from those of past generations. Millennials are hitting their prime spending years and will probably continue to exert a powerful influence over spending in the market for the next decade.
How Do Millennials View the Stock Market?
Millennials make up around 92 million of the US population. The oldest millennial, if you take 1981 as the starting year for millennials, will turn 39 this year. Less than one third of millennials have 401(k) savings. Less than 20 percent of millennials have an investment account. This is surprising since a little more than 50 percent of Americans donít invest in stocks at all, even though the rise of stock trading apps like Robinhood and Stash made it even easier to trade stocks online.
As a result, millennials have a unique approach or feel when it comes to the stock market. Many have no investments and just a few thousand dollars saved. Thatís why when they see the stock market rise or crash it doesnít really affect their life.
Market fluctuations seem like abstract things that affect others. Many millennials express sentiments like, ďWhy should the stock market matter to me if I donít have any money at stake?Ē
Millennial investments have been hampered by heavy loads of student debt. Many just donít have extra money to invest with. If they have extra money, they are directing it to their student loan debt.
By age 30, typical college graduates with student debt will only save around $9,000. Those without debt will save up to $18,000 on average. This impedes many from having the money needed to invest in the stock market.
Statistics show that 20 percent of people under the age of 40 are investing $100 or less each month. Many are not investing anything. The millennial generation, partly because of necessity and partly because of credence, is focused on their immediate needs. For this generation, itís harder to envision spending money on something that wonít be touched for decades.
Uncovering the Investment Habits of Millennials
Millennials who are investing are approaching investments from a different way than their predecessors. This is because digital investment platforms the U.S. and Canada have drastically lowered the bar for entry.
Millennials are more comfortable being self-directed when investing. They do not rely on traditional financial advice or traditional wisdom. Online exchanges are making it easy for millennials, even those who do not have a large disposable income, to trade for themselves.
Millennials are the first generation to grow up with technology already established. Technology is integral to any decision that they make. Therefore, when millennials invest in the market, about 67 percent of them rely on a bot or computer-generated recommendations.
Millennials are looking for a sense of autonomy over the financial decisions that they make. They bristle at the financial advice or the one-on-one personal contact previous generations relied on when making financial decisions. According to one report, only 20 percent of millennials feel comfortable working with an adviser exclusively. Theyíre way more comfortable using online financial tools such as a budget calculator to help them make their finance-related plans.
The millennial investing market is growing. Affluent millennials are turning to technology to manage their money because they feel this gives them more control than other investment methods. Millennials grew up using the Internet. They know where to go when looking for knowledge about a company or an investment.
Millennials benefit from living in a world that is more transparent. Influencers, blogs, online forums, and online investment platforms give millennials access to expert investing advice and knowledge.
Baby boomers are the force behind driving up the price of bonds and equities. Millennials are shying away from these areas and focusing on areas that mean more to them, such as tech stocks and cryptocurrencies.
Millennials and Gen Zers have shown more concern about the environmental and social impact of their investments. Some established players in the field seem to not thoroughly understand just how important this aspect of investing is to millennials, so they are not addressing this concern with any sincerity. As millennials become a larger block of the investment pool, failure to understand this will lead to disaster.
Are Millennials a Positive or Negative Influence on the Market?
The answer depends on what you consider to be positive or negative. Millennials have made it clear that for their generation building up money is not enough. They want to make tomorrow better. One survey showed that 77 percent of affluent millennials dedicate funds to affect investment. This is investing that does something good for society or the environment but still offers a return.
Millennials are investing in companies that have values that align with their own. These include investments in smart energy technology and enterprises that focus on improving solar energy or other clean forms of energy.
The market will follow the investors. If millennials are focused on businesses that make the world better, they might just see their dreams realized.
It can be concerning for some that millennials do not seem as eager as their predecessors to invest in the stock market. However, something has to be remembered is that most millennials got into the workforce during the financial crisis of 2008.
It has taken them longer to build up their investments. They still suffer from the fear of watching what happened to their parentís money that was invested in the market during that time. This has made some of them reluctant to jump headfirst into the market. Now that the downturn of 2008 is 12 years in the past and now that many millennials have been able to build up money, itís likely that more of them will invest. This can only be a positive thing for the markets from now on.