The millennials are a very interesting generation that’s grown up in a world that, mostly thanks to the internet, is completely different from any other previous generation. It has shaped them differently; millennials are generally more restless in life than other generations, but they’re also more connected and accepting of each other.
As with all things in life, the way of your average millennial has its cons and pros but that’s not what we’re here to discuss. Instead, we are going to focus on the investment trends that define this generation, based on the 18th Annual Transamerica Retirement Survey.
How is this generation investing and does the trends differ from their parents and grandparents time? Also, are millennials saving up for retirement yet?
That and much more is outlined in the following article.
Keeping Things Simple
The number one thing that defines millennials way of investing is simplicity. For example, a majority of the millennials prefer investing in index mutual funds since they’re considered “safer”. For similar reasons they also have a bigger interest in exchange-traded funds than previous generations.
These investments are defined as easy to make while the risk-profit ratio is rather low, meaning little to no maintenance work is needed for their portfolios.
According to a recent study, upwards of 30% of the market is now made up of passive funds and most of them are owned by millennials.
More Cautious Than Ever Before
Besides being attracted to simple investments, millennials have already proven to be more cautious than their parents, which seems to surprise many.
The reason for this is most likely that they lived through the stock crash in 2001 as well as the financial crisis in 2008–2009. In turn, this has taught them all too well how fast it can go south for a person that keeps all their money entrusted with banks and the government.
A result of this caution is, as mentioned above, an increased focus on safer investments. Moreover, it has made millennials sceptical of the stock market, meaning the experiment with alternative investments such as cash and cryptocurrencies, a development all industry experts can attest to.
Their Own Retirement Savings Plans
Another very clear trend is that this generation isn’t going to rely on the government covering for them when they retire. Never before have so many young people decided to start their own retirement savings plans instead of relying on specific benefit pensions.
That being said, signs are showing that the millennials might not be saving enough which could result in issues further down the road. This is especially true considering that millennials expect to retire much earlier than anyone else. In fact, 58% of America millennials are planning on being retired by the age of 65, compared to baby boomers where 69% thought they’d still be working at that age.
Social & Responsible Investments
Lastly, millennials have a strong interest in so-called “responsible investments”, where things such as human and animal welfare as well as the environment are taken into account when picking investments.
This has resulted in the need for a new market with profitable yet socially responsible investments.
Tips to Millenials
Based on the above-stated information, it’s obvious that millennials are hyper-aware of the world they live in and they aren’t afraid of doing things a bit differently. With that said, there are things that this generation could learn from their predecessors.
Therefore, we’ll wrap this article up with two financial tips for millennials.
The Importance of Emergency Funds
Having a few months worth of expenses saved up and readily available is crucial in life. If an emergency happens, you lose your job, or you get other unpredicted expenses, a few thousand dollars could mean the difference between being evicted or paying rent until your situation stabilizes.
Unfortunately, less than 25% of millennials currently have $1,000 saved and this makes them vulnerable in life.
Lastly, we want to encourage you to get started already. As mentioned, you guys are expecting to retire earlier than your parents as well as live longer than any generation before you. That means you also have to save more for the future.
Luckily, millennials are already putting away more money at an earlier age than both their parents and grandparents and 67% of them are prioritizing paying off debt over leisure.