The Top Ways That Millennials Invest Differently

 In Personal Finance


The life of a 25-year old Millennial looks nothing like the life his parents led just a generation earlier. No longer is a career, spouse, home and two kids by 25 the standard for adulthood.

Millennials do things differently. So different, in fact, that you are more likely to find 25-year-olds living with their parents than with their spouses.

This shift also means that Millennials create careers and invest differently than their parents.
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How Millennials Invest

Millennials–the generation born between 1981 and 1992, have an attitude about work that is different from Generation X, and the Baby Boomers before them. This generation is the first to have grown up with the Internet and have a world of information at their fingertips. Because of this, they understand what is possible, and they strive for maximizing their life experiences.

Millennials seek work-life balance. They find careers that challenge them, that give them a greater life experience, and that stimulate them intellectually. Employers use all kind of incentives to attract them, from flexible work arrangements to financial assistance for continuing education and on-site fitness facilities.

Millennials change jobs often, making lateral moves every few years to advance their careers. They don’t buy into the “traditional life plan,” which means waiting until retirement to start living. Many of them work in the digital arena to give them more time with family and their own hobbies and pursuits.

Millennials have crippling student loan debt, something that their parents did not. This generation has the heaviest debt load of any generation before them, and they have become more financially savvy as a result. They have less disposable income to invest, so they are forced to make more calculated decisions about where to park their money.

Miranda Marquit of Investor Junkie understands the financial choices that Millennials make given their levels of wealth and outlook for the future.

Millennials Invest Carefully

If there was one thing that the economic collapse of 2008 did, it was teaching young people to be slightly more risk averse than their parents. They saw entire retirement accounts wiped out, with years of hard work reduced to nothing. They wish to avoid the same fate for themselves, so they diversify their funds, spreading them out and taking a more conservative asset allocation.

They don’t simply dump all of their cash into a 401k. With a world of information at their fingertips, they research the best possible options for saving and investing.

Technology is Their Friend

While their parents may have made an appointment to sit down with a financial advisor at the bank, today’s adults are turning to the Internet for advice on how and where to invest. They are setting up their portfolios online, using virtual advisors to answer their questions and make recommendations. Many Millennials use the Internet to research extensively, comparing funds and looking at historical data in order to make the right investing choices.

Because of the lowered barriers to entry, many Millennials invest in their own small businesses. Whether they are selling handcrafted items online or starting their own delivery app companies, Millennials find that they can make a larger return on their investments by starting new small business ventures.

They Use Social Media

In the past, where you parked your money wasn’t normally the subject of casual conversation. This generation is all about sharing. They use social media to help their peers make the right investing decisions. There are applications that allow seasoned investors to share their knowledge with newbies, making investing a social activity that is entirely different from how their parents invested.

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They Have a Low-Risk Tolerance

Millennials don’t harbor any romantic notions of guaranteed 12 percent returns for the life of their investments. They don’t blindly believe that their money will always grow, even though historical data would say otherwise. Millennials saw the economic collapse firsthand, and many lost jobs and watched their parents lose all of their hard-earned investments. For these reasons, they are hesitant to jump feet first into any of their investment vehicles, and they watch their money closely to make sure it is performing as it should.

Instead of opting for risky investment vehicles like stocks, Millennials are more likely to choose bonds or other “safe” investments. They take a conservative approach to investing, making sure they will have enough money available for retirement. Because they are not confident that there will be enough Social Security available to them in their golden years, they make sure to have money accessible to them when they need it.

Many Millennials are Already Retirees

Yep, you read that right. Even though the oldest members of the generation are in their early 30s, there is a significant chunk of them who have left the full-time workforce and consider themselves retired. This crop of new retirees works remotely via the Internet, earning money while traveling the world.

Called digital nomads, they are fiercely determined to live life instead of working for 40-plus years for traditional companies. These digital nomads run their own micro-businesses, work for larger firms and perform creative work.

Many digital nomads have relocated to other countries. There is a huge movement of young people in the new, global workforce. Most are young men who live in Southeast Asia, earning a living and traveling often. They have chosen to opt out of the traditional workforce, and their investment choices reflect that fact.

Because they’re not saving for an eventual retirement, they are less likely to hold traditional stocks.

Millennial Women Still Less Likely to Invest

recent poll by Stash, the popular investing app, shows that Millennial women invest far less than Millennial men. Many report that they don’t understand how the stock market works. A huge chunk of them considers investing the arena of old, white men. Investing rates among women are low, and many companies are taking notice.

Entrepreneurs are working hard to devise apps that will attract women and entice them to start investing.

When it comes to investing, Millennials do things differently. This new generation has their own ideas about life, their own challenges, and their own solutions.
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Sergey Sanko
Sergey had started an IncomeClub after years of being an investment advisor for high affluent investors and managing fixed income securities. He is the lead investment advisor representative and holds a Series 65 license. Sergey earned his Executive MBA degree from Antwerp Management School.
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