How Millennials are Changing Investment

How Millennials are Changing Investment


At first glance, the idea that millennials might be changing the way that investing works seems counterintuitive. After all, aren’t this generation burdened with low wages and oppressive student debt? In fact, while there is much truth in the stereotype – particularly regarding the debts that millennials have to take on to get an education – this hasn’t stopped them from having an increasingly significant effect on the way that investment works.

This is not just simply due to millennials’ comfort with technology. They are the first generation to grow up with the internet, and while their parents and grandparents may still regard the digital world with a mixture of fear and suspicion, millennials have no problem navigating a technologically rich environment, and using it to gather their own investment information, whether that is through an online trading wiki, independent stock research or informative blog articles.

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Millennials have been faced with dramatic hikes in the cost of college tuition, as well as the lingering effects of a financial crisis – caused by the greed and recklessness of their parents’ generation – and a terrible jobs market, which in many cases forces them to take on even more debt to obtain post-graduate qualifications just to compete. The result of these influences is a general predisposition to prudence and a suspicion of traditional investing.

While much of the debate around the impact of millennials focuses on technology and the need of traditional investment operators to offer a more technologically enticing product to attract younger investors, the real impact of the millennial generation will be felt in the way that the investment markets themselves change. Millennials overwhelmingly don’t trust banks or the stock market. They are also more likely than previous generations to be concerned about the ethical aspects of investment and to prefer newer start-ups to the older large corporations from the oil and finance sectors that have dominated markets.

The immediate effect of this shift is a boost to the private investment market at the cost of the public market. Instead of investing in passive index funds that may include global corporations that millennials distrust, they are increasingly choosing to make private investments to companies with which they feel more comfortable. Technology is making it easier than ever for individuals to invest in private companies, particularly start-ups, which account for a large proportion of new jobs in the US economy.

This shift from public to private investment poses a huge challenge to traditional financial markets, banks, major companies and stockbrokers, and requires new thinking from everyone involved in the financial sector, as these trends are unlikely to be reversed.

After all, the financial power of millennials is increasing. As family wealth transfers from the aging baby boomer generation, millennials will end up controlling an enormous volume of liquid assets. With this money behind them, the generation that came of age during the financial crisis will be in a position to permanently change the face of finance and investment over the next decade, with profound consequences for all of us.

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