How Does Millennial Investing Differ From Their Parents
Millennials are investing differently than their parents and it’s due to a number of factors. They can be wary of the stock market, may lack sufficient funds to invest, or they may be investing through mobile apps and online websites.
Although not yet the norm, millennials are beginning to ask the right questions surrounding investments instead of blindly entering into the one type they recognize. The information is easily accessible to them via the internet, and it gives them the opportunity to research the different types of investments and which of them would be beneficial to their particular situation. Because of this, millennials are investing differently than their parents are, whether it be different kinds of stocks, through mobile apps, or complete avoidance of the stock market all together. So what does this look like, and what does it mean for the future of investing?
Millennials Can Be Wary of the Stock Market
Millennials, especially older millennials, lived through the Great Recession, and some have chosen to avoid the stock market altogether. A survey conducted by Bankrate found that only about 30% of people under the age of 30 owned stocks in 2016. While this could be attributed to a number of factors, the answer was largely the fear of investing hard-earned money and then losing it.
Millennials May Lack Sufficient Funds to Invest
Millennials, as a generation,are facing perhaps the most uncertain economic future to date and can be considered the poorest generation. In fact, millennials own just 5% of the wealth in America, which is much lower than the 26% of their parent’s generation.
Although the millennial generation is considered to be the most educated, they also have the least disposable income of past generations. An increase in wages has helped in recent years, but the cost of living has increased at an even quicker rate, tipping the scales out of their favor. Millennials are also faced with high amounts of student debt, something their parents’ generation did not experience to the level of the millennial generation. Lower wages and less ability to save lead to less disposable income for investments.
Millennials often see their career paths and retirement differently than their parents did. Instead of saving and investing for the future, many millennials prefer to live in the now and use what disposable income they do have for traveling and hobbies. While this is not a negative trait, it does lead the millennial generation to be less active in the investment market.
The Overall Millennial Approach
Millennials have a very different approach to life and finances than their parents did. While their parents were receiving 100% matches for their retirement plan and counting on Social Security and pensions to sustain them after retirement, millennials are not often offered these same opportunities.
In 2022, a company that matches even 5% of your retirement contribution is considered a big deal, while many companies have stopped offering retirement benefits altogether. Social Security is no longer a reliable option, and many millennials anticipate working until they physically cannot anymore
Because of the job market and financial approach, millennials aren’t investing as much as their parents did. They prefer to use what little disposable income they have for their personal things versus investing it.
Investing Through Mobile Apps
Although millennials have generally been investing less, that trend began changing in 2020. Americans have opened over 10 million new brokerage accounts since the start of 2020, and over half of them came from Robinhood.
Mobile apps such as Robinhood are easily accessible to anyone with a smartphone, and it allows users to invest in small scale stocks with just the swipe of a finger. The median age of Robinhood account holders is 31, and the average millennial is 32, so we can make the assumption that the majority of these 10 million new brokerage accounts are owned by their generation. Mobile apps are something their parents’ generation did not have access to in their early investment years, and although some may get on board, many of them choose to stick with traditional investing.
Millennials Can Change the Stock Market
An increase in millennial investing has changed the stock market much more than their parents ever could. When they start to pour into the market, they make waves as the largest generation in American history. We saw it with Gamestop in 2021, and we will continue to see it as long as millennials continue to invest. In addition to making quick cash, millennials see investing as a way to take over Wall Street and its heavy investors.
Overall, the accessibility of investments and the increase in digital capabilities have changed the way people invest. Millennials are not only able to make investments through their smartphones, but have market research at their fingertips through online searches and professionals who post their expertise. While Gen X could take advantage of these options, they are more likely to stick to traditional ways of investing, through brokers or firms.
Call Carty & Co
Despite the new tools available to millennials and more experienced investors , we encourage anyone considering making large investments to connect with our financial professionals at Carty & Co. Our experienced financial representatives can help you make these decisions and offer you terrific financial advice.
The commentary is limited to the dissemination of general information pertaining to Carty & Company, Inc. This information should not be used or construed as an offer to sell, a solicitation of an offer to buy or a recommendation for any security, market sector or investment strategy. There is no guarantee that the information supplied is accurate or complete. Carty is not responsible for any errors or omissions, and provides no warranties with regards to the results obtained from the use of the information. Nothing in this document is intended to provide any legal, accounting or tax advice. This information is subject to change without notice and should not be construed as a recommendation or investment advice. You should consult an attorney, accountant or tax professional regarding your specific legal or tax situation. Carty & Company is a registered broker-dealer, member FINRA and SIPC.