Before 2018, Millennials--currently the largest generation on the planet--will have a majority control of the economy. So why do only one in three millennials invest in the stock market? Perhaps because Millennials have increasing financial burdens (like student loan debt) which prevent them from sustaining a disposable income. Maybe Millennials feel like they do not, or cannot, understand how the stock market works.
Other Millennials resist the stock market because they are afraid of the perceived risk. The predicted "great wealth transfer" means that in the coming years, Millennials will inherit an estimated $30 trillion in wealth from previous generations. Millennials, the stock market isn't just for your parents or your grandparents. Here are seven reasons why they should stop being afraid and start getting real about the stock market.
1. Millennials are educated. In fact, no prior generation has ever had such access to formal education. Most Millennials undertake considerable debt in order to pursue post-secondary schooling--clearly, they understand the value and necessity of investing in their future. 63 percent of Millennials have a bachelor's degree, and master's degrees are becoming more common among the generation. Entrepreneurial Studies has become one of the top majors for Millennial students. The truth is, perhaps more than any generation before them, Millennials have the necessary knowledge not only to participate, but to truly succeed, in the stock market.
2. Millennials care. More specifically, they care about ethical and sustainable business practices. As consumers, Millennials demand that the companies from which they buy goods and services adhere to corporate social responsibility. Companies which do not comply with Millennials' values are in for a rude awakening. For example, many Millennials have vowed to boycott makeup and cosmetic brands, like MAC and Urban Decay, due to the companies' policies on animal-testing. Because of Millennial consumers, 81 percent of Fortune 500 companies produced sustainability reports in 2015. For Millennials, the stock market offers an alternative avenue to not only support and invest in companies which share their values, but also to send a message to those companies which do not practice corporate social responsibility.
3. Millennials are the Digital Generation. It's no secret that Millennials have a keen eye for communications and technology--their social media use is often what distinguishes them from previous generations. Most Millennials are employed in social media and online marketing roles and Google is among the top employers of the cohort. What is so important about Millennials' technological inclination? They're investing differently. While their parents and grandparents prefer to invest in Ford, Millennials who are active in the stock market are investing in more expensive stocks, like Tesla. More so than previous generations, Millennials value clean energy and technology. The stock market is transforming rapidly with the introduction of new digitally-focused corporations, and Millennials can keep up.
4. Millennials are young. Because of their age, which usually ranges from 18 to 35, it can be easy for Millennials to procrastinate investing--the stock market is a low priority. However, investors who start young are able to invest less and earn more than those who start later in life. Financial risk also decreases with long-term investments. A one-year investment has a failure risk of one in four, and that rate would decrease to one in 25 with a 10-year investment. The bottom line: Millennials have the youth advantage in the stock market.
5. Millennials are going to live a long time. Lifespans are increasing, and Millennials are no exception. This means that Millennials are tasked with the financial burden of preparing for a life that may be over 100 years long. Investing in the stock market could potentially keep Millennials financially stable well into their triple digits. Of course, 401(k)s are also a good response to aging.
6. Millennials know their priorities. Their parents and grandparents saved money for a house or a car. Millennials, however, tend to spend their earnings on experiences (like travel, music festivals or going out to eat) rather than material goods. The stock market is adapting to reflect this change in values. Bloomberg.com reports that "leisure and travel-related stocks, including pubs, airlines and pizza restaurants, have trumped retailers since consumer confidence picked up following the financial crisis." Furthermore, 82 percent of Millennials reported going to a live event last year and 72 percent plan to increase their spending on similar live entertainment. They've already changed the market, so investing in experiences is something Millennials can get behind.
7. Millennials are social. Both as consumers and as entrepreneurs, Millennials have a unique approach to marketing. Just 17 percent of Millennials have purchased something because they saw an advertisement on TV. The rest of the cohort turns to social media to discern which brands and products are worth their investment. Millennials are more likely than previous generations to interact with consumers online before making a purchase. The generation possesses the online research skills to determine whether a good or service is worthwhile. They buy things differently, so Millennials bring a unique perspective to the stock market.
Millennials have the opportunity to foster a fruitful financial future, and it starts with smart, unafraid investing.
You May Also Be Interested In Reading: The Great Transition
Sources:
investors.com/etfs-and-funds/retirement/the-money-move-that-67-of-millennials-should-make/These Stories on Industry Trends
