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Millennials And The Stock Market: It’s Complicated

Most people don’t even think about millennials and the stock market, as it’s often interpreted that young people are too broke to invest at all.

While several studies reveal that the bulk of millennials don’t invest in the stock market, trends are beginning to change as the oldest batch of folks in our generation approach 35.

The bottom line: millennials are now the largest generation alive in America today, and our consumer behavior has begun to influence the stock market and the wider investment scene.

Older millennials paving the way

Millennials are quite a broad age group. While there’s no official definition, people who are now between 18-35 are generally included in this demographic group. Because of this big age spread, it’s important to consider that many people aren’t investing yet because they’re too young to rub two pennies together, nevermind invest in the stock market.

That’s why millennials, when viewed as one cohesive group generally don’t make enough money to save, invest or prepare for retirement.

But this isn’t case with older millennials. In fact, a Bankrate survey found that while only one in three millennials invest in stocks, 44 percent of people between 26-34 have money in stocks. Interestingly, that percentage isn’t much lower than the number of Generation Xers (51 percent) and Baby Boomers (48 percent) who also own stocks. This seems to suggest that millennials eventually will buy stocks as much as previous generations.

Traumatized by the Recession

For many millennials, the recent history of the stock market is like a roller coaster.

Some millennials may remember the dot com crash back in the 1990s, when the Silicon Valley bubble burst. But nearly every millennial still remembers the last crisis when many got burned by bad investing advice.

That’s because many of us came of age during the Great Recession, and we saw our parents get wiped out by the dramatic drop in valuations. This is precisely why many surveys, such as one by BlackRock, show that nearly half of millennials find investing in the stock market to be risky.

In all fairness, many of us also saw our parents and older colleagues take a bath on real estate as well. The stock market, real estate and the wider economy are more volatile than they used to be.  

Eventually, most millennials will have more disposable income than they currently have now, and they likely will earmark some of those monies to invest in the stock market. Younger millennials also will have less acute memories of our traumatic economic past.

Not your typical investor

While most millennials are still unable to invest, we’re disrupting the world of investing in several ways. We’re much more likely to use Financial Technology, or fintech, to better manage our portfolio than past generations. We’re much more actively curious in our investments than past generations, who often passively invested through their broker. Additionally, millennials are more apt to invest in stocks that touch their lives. For many of us, Amazon, Apple, Google and Netflix are mainstays in our consumer existence. We’re also better connected to startup culture and are often actively consuming services from relatively new startups.

In this sense, millennials have an edge over their older counterparts as they have a better understanding of the fastest growing companies and their respective business models. Fortunately, a look at recent history teaches us that tech companies that have a decent shot of growing faster than most stocks in the coming years.

Takeaway: We’re getting there

As older members of our generation are showing us, millennials are coming around to the stock market as they age and have greater amounts of disposable income. Since we’re slower than past generations to transition into adulthood, and face high levels of student debt, it’s not rocket science to figure out why we are so late to the game.

Like every other industry, our generation’s habits are poised to cause mass disruption, and investing is no exception. For now, the relationship between the stock market and millennials may be complicated, but fear not. In just a few years, industry standards will be tailored around our tastes and preferences as our economic dominance becomes entrenched.

This article was originally published on GenFKD.org.

Photo by ota_photos

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