07 Jun Millennial investing habits
Photo by Julian Gentilezza on Unsplash
I recently read an article about the investing habits of millennials which was based on a survey carried out by ”Morning Brew”, a US based daily business briefing newsletter that targets a millennial audience.
The results were interesting, particularly when you consider that the millennial generation or “Generation Y” (generally considered to be individuals who reached adulthood around the turn of the 21st century or individuals born between 1982 and 2004) are the next generation to inherit considerable wealth.
However, it is thought that Generation Y (Gen Y) do not necessarily follow the same investment approach as their parents. They have different views, spending habits and knowledge of investing.
The survey’s aim was to try and find out what Gen Y’s current financial habits are and their attitudes towards investing. Morning Brew received 9,800 respondents from North America and Europe, with all respondents being between the ages of 18 and 35.
68.1% of respondents were employed full time, 27.6% students and 4.2% working part time. Of these respondents, 89% said that they currently invest. They had a broad range of financial goals ranging from getting a degree, buying a car, getting married and buying their first home – all of which are not surprising given the age range of the respondents. What is more interesting is what they are investing in and how they go about it.
By far the largest investment sector they were allocating disposable funds to is the technology sector. Nearly half of respondents stated that this is what they are investing in. The next most popular sectors were healthcare and energy – both of which were over four times less popular than technology. Given the age range of this group this is also not that surprising, but it is more interesting when you consider that when asked which technology companies they want to invest in, nearly a third choose one of the big three – Amazon, Apple and Google.
When asked how confident they are at making investment decisions most, c.82%, respond with low or moderate. This may partially explain why technology and the resulting big three are popular choices for investment as the sector and these companies within it are very familiar. Gen Y have grown up alongside these companies. They do not seem to be trying to find the next Apple or Google, but this is probably down to a lack of knowledge and confidence.
This raises several concerns relating to sector risk, specific company risk and a general lack of confidence, which may come from a perceived lack of knowledge in investing.
It’s also interesting that despite many arguments that the younger generations do everything online or via automated advice portals c.70% said that they would prefer face to face advice. This, and the general lack of confidence, mirrors other research I have seen which suggests that ‘millennials’ are looking to be educated, listened to and helped by trusted persons. Although of those who pick individual shares, most said online research tools are important sources of information when choosing which companies to buy.
They also seem to have understood that focusing on fees is important as c.42% said that fees were in their top three deciding factors when deciding on professional services.
Perhaps the most surprising result of the survey was that most of the respondents weren’t particularly bothered about the social impact of their investments, with only c.21% saying that this was an important consideration and c.35% saying that it was not important. This generation is often seen as the one most concerned with the social impact of their decisions, but this may not be the case when investing. However, this could just as easily be down to a lack of reliable information or education on the impact of their investment decisions.
My conclusions from this survey are that Gen Y are investing and understand the need to, otherwise why would they bother, but they don’t feel very confident in what they are doing. This may explain some of the investment decisions such as buying individual company shares in companies and sectors that are familiar to them.
Our responsibility as wealth managers, parents and mentors for this generation and the next is to make sure that as many people as possible have access to information, education and help about financial planning and investing so they can make informed decisions which will affect their futures but also impact on ours.
Source: “Visual Capitalist – Forecasting the Investing Habits of the Millennial Generation”