Generation Y, also known as Millennials, are today’s teens and twenty-somethings born in the ’80s and ’90s and numbering about 80 million in United States. In the coming years, they will continue to be a major force in the economy, especially as they mature. Recent studies show that 29% of wealthy investors are under age 50 and control 37% of investible assets.
When it comes to trading, Millennials are taking a completely different approach, taking things in a much different direction that their predecessor Baby Boomers and Generation X-ers.
No longer are stock tips being passed along on golf courses, on the phone. Long gone are the handshake investment deals at cocktail parties. Today, all it takes is a few clicks on an app for Millennials to review a prospectus, get advice, and even make an investment.
Nearly 60% of millionaires from this generation would be willing to use webcam technology, including Skype and FaceTime to speak to their advisers and clients. Studies also show that people between the ages of 20 and 35 are more likely to take advantage of online tools for monitoring their investments. They’re not sitting around waiting for reports to come in—Millennials demand instantaneous information, and they are ready to respond immediately.
But that’s just the logistics side of things.
When it comes to investing, Millennials often prioritize social and environmental issues and the greater good when choosing an investing strategy.
Several studies all seem to reach the same conclusion: The main objective of the average Millennial is to do good in some way by giving philanthropic investment a good and focusing on investment issues related to renewable energy, basic human rights and what we might call “impact investing”. These studies claim that more than 85% of Millennial respondents expressed an interest in, or owned, social impact investments.
Also diverging from the past, Millennials demonstrate that they really need to believe in what they are investing, whether it is a social trend or a company. Millennials are much more careful and are willing to shop around. They have developed a widespread mistrust of banks, and are much more cautious about where and how they are going to invest.
Generation X survived a fair amount of economic turmoil and has had to work hard to recover from major losses, particularly during the most recent recession. This is part of the root cause of Millennial’s mistrust of banks. Many of them like to keep their assets in cash because they started out life when their parents’ retirement accounts were wiped out, and were faced with financial hardship as a result.
That is why there may be fewer day traders among Millennials, but those that do are bound to be successful. Surveys estimate that 26% of Americans under the age of 30 are investing in the stock market, compared to 58% of investors 50 years and older. Still, surveys found that 45 percent of Millennials are more interested in investing in the stock market today than they were just five years ago. So they may be fewer in numbers, but they might just pack a bigger investment punch—and the trend is on the upswing, unlike Baby Boomer figures, who are in rapid decline.
Because Millennials don’t chose brands—or even make investment decisions—based on recognition alone, a lot of research goes into everything they do. The amount of effort made to make sure an investment suits them is much greater than previous generations. In short, Millennials have no problem doing their homework, and this is a key to successful trading.
All the new technology and apps make it easier for Millennials to find the investment vehicles of their choice, and Millennials, unlike their predecessors, are much more eager to strap these tools on. Technology, at the end of the day, expands choice and awareness—and Millennials are at the top of this food chain right now.
Whether we’re talking about making trades, checking portfolio balances, or just finding the latest financial market news, there is quite a lot to choose from. But the bottom line is that we’ve moved from the golf course to the online everywhere and anywhere, with Bloomberg, Jstock, StockTwits, StockstoTrade and Profit.ly.
When it comes to earnings, Millennials are actually at pretty much the same place Generation X-ers were at the same age, and while there are predictions that Millennials could see a major boon in wealth in the coming decade and a half, the generation that follows them might do even more if studies on generational ambition are anything to go on.
The next generation—Generation Z, or Post-Millennials—who are now aged 15 to 20, is perceived to be more ambitious and energetic than their predecessors. The predictions are that this upcoming generation will be more willing to work longer hours to get where they want to be.
According to several surveys, around 58% of Generation Z-ers said they would come into work on evenings and weekends in exchange for a bigger paycheck, compared with 45% of millennials and 40% of Generation X-ers. Also, among the all generations surveyed, Z’s were the most motivated by money.
Who is the Better Trader?
That’s a moot point, because the playing field has changed and the newer generations hold the keys to the technology behind those changes.
Right now, it could be said that Generation X takes a hands-on approach to investing and focuses on avoiding fees, which is key to preserving earnings. Gen Xers are more likely than Millennials to say they have general investment knowledge, feel confident in their investments, have assessed their risk tolerance and regularly rebalance their investment accounts. By educating themselves on investment topics, Gen Xers have more control over their investments and may often make smarter decisions–today.
The pitfall for the Millennial is the need for instance gratification, which technology often gives them. They risk developing unrealistic expectations for trading in this respect. They crave instant information, and instant results. But if you combine this with their psychological profile of being cautious with money and willing to do research, a picture emerges of a very formidable trading class—if not today, then soon.
While Gen Xers have proven today to be good traders, Millennials are actually thought to be more confident about the future and—despite their general need for instant gratification—more willing (at least than Baby Boomers) to take more time to review an investment before diving in. A study by BlackRock showed that Millennials spent seven hours per month studying their investments, compared to two hours spent by the average Baby Boomer.
Millennials are a bullish group of traders, but tend to focus more on the long-term than the day trading—and there are very committed to protecting their financial futures to avoid a repeat of what happened to their parents.
So while Millennials are not the biggest day-trading generation, the technology is certainly pushing them in that direction and they have what it takes—speed, caution and willingness to do homework—to make a successful run of this.
Which are you? If you’re straddling one of these generations, you might want to take a long look at the generational psychology behind your strategy and decisions to figure out what best suits you—and why.