Why Millennial Investing Is Trending Away From Stocks

Jul 17, 2017

Whether they’re killing the golf industry or changing the way business is done, Millennials are changing everything.

And that includes investing.

For years, most investors have put their money in the stock market. With the influx of Millennials into the financial sector, that is slowly changing.

According to a survey by Goldman Sachs, only 18% of Millennials see the stock market as the best way to save for the future. 40% have no interest in the stock market at all.

In this article, we’ll take a look at the top trends in Millennial investing and try to understand where the market is headed.

Millennials Have Seen the Market Crash—a Few Times

Millennials are the generation between age 18 and 35 that grew up in the 90s and 00s. Those two decades saw some huge changes to the economy.

Millennials grew up through the Dotcom and housing bubbles and the burst of those same bubbles. They’ve lived through two recessions.

We’ve all seen how the Great Depression had a lasting impact on the financial habits of our grandparents. These booms and busts have had a similar effect on how Millennials make their investments.

Having seen high-risk, short-term investments fail, Millennials are skeptical of the stock market. Despite nearly tripling in the years since the Great Recession, most young investors see this growth as unsustainable.

Millennials Have Less Money to Invest

It’s not laziness: Millennials earn lower wages than their parents did. And that is coupled with much higher student loan debt.

With a higher debt-to-income ratio than previous generations, Millennials have less disposable income.

That includes income that would go toward investments.

Millennials invest less because they have less to invest. And what money they do have to invest is less likely to go to the stock market, because…

Millennial Investing Prefers Low-Risk Options

Having lived through such chaotic highs and lows, Millennials a healthy skepticism of risky investments. And that includes the stock market.

With less money to invest, Millennials are more careful with their options.

According to a survey by Bankrate.com, thirty-nine percent of Millennials prefer cash investments for long-term financial planning. Twenty-three percent prefer real estate.

Both of which lead the stock market, which comes in at only 19%. This is despite significantly higher returns on investment.

But Millennial investing is more interested in security than ROI. The stock market may have more potential for high gains, but that comes with a healthy dose of risk.

And young investors aren’t interested

Millennials are Skeptical of Large Corporations

It’s no secret that Millennials don’t trust big corporations.

As consumers, Millennials are moving their money away from big brands and toward smaller or local companies.

Millennials aren’t as concerned with economic success as their parents. Instead, they are more concerned with environmental sustainability, economic equity, and product quality.

As a result, they have little interest in cutthroat corporations. Millennials are not impressed by sacrificing quality or cutting wages to increase profits.

And since most local companies don’t trade on the Stock Exchange, many Millennials simply aren’t interested.

One thing is for sure. As they become a larger portion of the economy, Millennial investing habits will have a permanent effect on the financial sector.

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