Thanks in large part to the growing trend toward entrepreneurial pursuits that seems to be sweeping the western world, millennials are increasingly attuned to the necessity of financial planning. In a way, the idea of investment has become cool to young people who are looking for any and every way to set themselves up for prosperous financial futures. When it comes to investing, however, wanting and doing are two very different things. No matter how much entrepreneurial spirit and general financial savvy millennials are developing, they’re not always prepared for the same types of investment that previous generations grew up with.
Most notably, millennials don’t always gel particularly well with the stock market. In fact, surveys show that people in this generation simply aren’t interested in the stock market for two main reasons. The first is that they’ve seen two major financial crashes in their lifetime and grown to distrust the market (not to mention they’re constantly hearing the narrative that the market is rigged). The second is that they want quicker options and don’t want to devote the time needed to research a stock, let alone plan a portfolio. truth that question comes down to each individual’s preferences, but there are some options people in this generation may consider.
The first is buying into a mutual fund, which primarily solves the issue of, for lack of a better term, impatience. Millennials tend to be well aware that a mutual fund can offer them the benefits of strategic market investment without any of the hassle. Thus, they’re not only putting their money into established funds, but some studies show they’re doing so at a younger average age than previous generations. However, if you happen to be a young person exploring investment, there are certain things to be wary of regarding mutual funds. One analysis showed that an increasing number of fund managers are compiling riskier portfolios to appeal to millennials who want to buy into disruptive technology and future assets. This can work out, certainly, but it’s a step to the side of the traditional setup of a mutual fund as a low-risk, slow-and-steady venture.
Another option that avoids traditional stock market complications is the forex trade, or the buying and selling of currency pairs. The forex trade satisfies many traits of millennials related to financial investment, such as risk-aversion, the need for instant gratification, and even a preference for dealing with technology. This is not to suggest that forex trading is always risk-free or instantly gratifying, but there are aspects of this type of investment that help it to fit into these millennial preferences rather nicely. Some view the high liquidity and massive nature of the market as one that makes it less prone to sudden shifts (or, as millennials will like to hear, corruption). Additionally, high liquidity also means trades can be executed reliably and almost instantaneously, which checks the “instant gratification” box. And finally, the ability to execute forex trades through platforms and even apps designed just for that purpose makes this type of investment a little bit more relatable to young people.
As an aside regarding the idea of using apps for investment, those millennials who do opt for ordinary stock investment (and there are sure to be many despite the above concerns) may now feel most comfortable doing so via any of a number of apps that have emerged for just such a purpose. Stash and Robinhood are perhaps the two best known. They offer legitimate market investment options without the hassle of an online broker, and often without the fees that typically come with executing trades. These apps are sleek and attractive, and basically speak the millennials’ language.
But getting back to alternatives, the final type of investment that may appeal to millennials speaks to the same entrepreneurial spirit discussed earlier. There are now numerous online platforms that allow pretty much anyone with an account to invest in start-up businesses, essentially like a mini-venture capitalist investment. This is an extraordinarily trendy concept to a lot of young people, and while it’s generally viewed as a risky way to invest, it’s something that this generation can get excited about. That excitement can lead to the kind of research and education that young people simply don’t want to put into the stock market, and thus can result in a strategic mode of start-up funding.
The good thing, again, is that millennials are fully aware of the advantages of investing, and doing so at a young age. And while they seem to be largely rejecting the forms of financial planning preferred by previous generations, the alternatives discussed here should show that they’re still finding plenty of ways to begin growing their wealth.
Founder Dinis Guarda
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