Investing platforms that are used by millennials include Robinhood, Ellevest, Arcons, and Betterment. In addition, millennials are attracted to stocks in the technology, airline, and video streaming sector. A comprehensive overview surrounding how millennials are investing has been provided below.
- Approximately 28% of millennials that are saving are investing in the financial market. In 2019, 15% of millennials began investing or growing their investments. When asked what they would do with a $10,000 windfall, only 10% said that they would invest.
- A 2019 Investopedia Affluent Millennial Investing Survey revealed that 43% of millennials use financial advisors. The survey respondents noted that they trust financial advisors more than podcasts, online video content, magazines, websites, newspapers, books, and TV shows.
- Furthermore, the study revealed that only 20% of affluent millennials use robo-advisors but according to a Charles Schwab report, 79% would want the offerings by robo-advisors augmented with access to human advisors.
- Millennials are more tech-savvy when compared to baby boomers. Therefore, they expect personalized products and experiences.
- Four in ten millennial investors are interested in trading shares, primarily because they have access to trading apps that charge affordable fees for their services. In addition, millennials prefer using these apps due to the low interest rates associated with traditional savings accounts, which are no longer considered a viable way of gaining higher returns on savings.
- Despite the market volatility as a result of the COVID-19 pandemic, investing apps are seeing an increase in user activity as young investors enter the market. The market crash that took place on March 18 adversely affected many investors, however, it convinced a number of millennials to enter the market and start investing.
- For instance, since the pandemic, Albert, an app by Albert Investments reported increased activity. The app has over three million users with 80% being between 26 and 35 years old. The app automatically pulls money from a user’s checking account to a savings account.
- Betterment, a financial management app, noted that it recorded a 25% increase in investment accounts in the first quarter of 2020. Approximately 60% of Betterment’s customers are millennials. According to the company, the increase is attributed to shifts in the labor market where millennials were the most affected by job losses, which led to a need for supplementing income.
- Acorns, an app that is targeted towards millennials, reports that currently has 8 million users. The app “rounds up purchases to the nearest dollar and invests in the difference.” Other apps that are popular among millennials include Robinhood and Stash.
- Robinhood is another popular app among millennials that gamifies investing and sends users push notifications regarding their individual stock positions. When a new user makes his or her first trade, “digital confetti falls in the app.” Robinhood also has a watch list that users can use to track stocks.
Stocks Millennials Are Attracted To
- Millennials are more engaged in the stock market today compared to the 2008 recession. Also, they are more likely to invest in the stock market during the COVID-19 pandemic as they try to benefit from the market’s volatility. According to Vladimir Tenev, co-founder of Robinhood, millennials are buying stock from sectors that were affected by the pandemic.
- The co-founder, who was speaking at an investment conference, noted that most of Robinhood’s customers are buying shares of streaming media companies, videoconferencing firms, and airlines. Many millennials are working from home due to the pandemic and actively trading. Consequently, airline stocks might grow in popularity since younger people who love to spend on experiences and travel prefer purchasing shares from a sector that will eventually bounce back.
- The CEO of US Global Investors, Frank Holmes, has noted that millennials refer to sources such as “DJ’s Aviation” YouTube channel to get investment tips and regularly look at TSA’s daily checkpoint updates so that they can be aware of any potential rebound in air travel.
- According to Floyd Miller, Albert’s director of research and development, there has been increased interest in biotech stocks from millennials.
- Technology remains an area of focus for millennial investors. They are mostly interested in investing in companies such as Netflix, Amazon, Facebook, and Alphabet. According to Apex, a trade-clearing company, Apple is the most favorite stock for millennials. Apple split its stock to lower its share price, which made it affordable for younger investors.
- Tesla is one of the most popular stocks among millennials. Young Tesla investors have a strong interest in alternative energy sources and electronic vehicles and many see Elon Musk as a visionary with the potential to change the world.
- “Millennials are riding the momentum wave of Apple and Tesla but buying the dip in Boeing, which is down about 50% to date.” The company’s stock fell before the pandemic after the company’s airplanes had two fatal crashes.
- Another stock that millennial investors are interested is Aurora Cannabis. According to Robinhood, Aurora Cannabis is the most popular stock with 568,973 members having a stake in the company. Millennials are interested in Aurora Cannabis because of its lading production potential, expansion into overseas markets, and its share price.
- Two other stocks are popular among millennials are Microsoft and Advanced Micro Devices. Moreover, millennials are benefiting from stocks, such as Snap and Federal National Mortgage Association.
- Other popular stock holdings by millennials are Berkshire Hathaway Inc., Alibaba Group Holding Limited, and The Walt Disney Company.
Investing Behavior Based on Gender
- Millennials identify global inequalities, such as poverty, world hunger, and access to healthcare, and climate risk, which ultimately leads to a heightened sense of global responsibility and increases the demand for sustainable investments.
- Before 2019, women millennial investors had a high likelihood of factoring sustainability into investment decisions compared to their male counterparts and understood the advantages of doing so. However, according to the Morgan Stanley Institute of Sustainable Investing, the interest dropped to three percentage points in 2019 from 17 percentage points in 2017.
- Many millennials grew up with mothers who had full-time jobs outside the home. As such, they have a high likelihood to work full-time and create a lot of personal wealth. Also, 46% of all high-net-worth women and 68% of executives who are women are interested or own ESG investments.
- Thirty-two percent of women are likely to have more interest in impact investing compared to men. Women feel strongly about supporting specific causes for the greater good.
- Additionally, women’s impact investing is driven by the notion that good corporate citizenship has a positive impact on performance. Therefore, their impact investing is not primarily about achieving good risk-adjusted returns. Conversely, men “place a higher priority on the potential that impact provides to reduce business risk.”
- Despite women also valuing companies with high ESG scores because they have better financial performance and lower risk, women engage in impact investing to see progress in women’s rights, good jobs, and the environment. An example of an investment app that focuses on advancing women is Ellevest.
Millennials and ESG Investing
- Social impact is considered a top priority for millennial investors. Therefore, they have a high likelihood to invest in companies that integrate the political and social concerns, such as water conservation, clean energy, and equality. According to a 2018 study by Bank of America, 77% of high-net-worth millennials are interested or own impact investments.
- Approximately 87% of high-net-worth millennials look at a company’s ESG track record before making an investment decision. On the other hand, 90% of millennials want their investments to match their personal values. As it stands, 46% of millennials that have a financial advisor discuss about how to align their investments with personal values.
- According to a 2019 study by the Morgan Stanley Institute, “95% of millennials were interested in sustainable investing.” Interest in ESG investing among millennial investors increased from “84% in 2015 to 95% in 2019.”
- Approximately 88% of high-net-worth millennials are actively assessing the ESG impact of their investments. Conversely, 89% of millennials expect their financial advisors to conduct deep research into a company’s ESG history before recommending it for investment. About 57% of millennial investors have declined or stopped investing in a company due to the impact its product or services have on the community.
- According to Deloitte, 76% of millennials hold the view that businesses can be used for social good but only 56% of companies focus on that, which is something that might affect their investment decisions in future.
- Millennials are expected to receive over $30 trillion of inheritable wealth, which means that the demand for sustainable investments will continue to grow. Consequently, fund managers are allocating more resources to come up with products that appeal to this emerging client segment.
- Examples of platforms that offer ESG portfolios include Merrill Edge, Motif, and Ellevest. Merrill Edge offers impact investing where the platform screens companies that are socially responsible, sustainable, have environmental or social themes, and address specific environmental and social concerns. The app ensures that users make investments in companies that promote and meet their sustainability goals, measure and encourage corporate social responsibility, and are at the forefront of factory worker safety and fair trade.
- Motif, which is owned by Charles Schwab Corporation, is an automated investing platform that focuses on thematic investment strategies and enables investors to “trade weighted baskets of stocks built around environmental, social and governance principles, letting them invest in companies that promote social good.”
- Ellevest has impact portfolios that allow users to invest in companies that have policies that advance women and have more women leaders. In addition, the portfolios focus on companies that support community development and sustainable practices.