How Millennials Are Changing Stock Investing

Posted by CopyTeam

Millennials are on schedule to inherit a substantial portion of $30 trillion in baby boomer wealth throughout the next 20 years.¹ But in terms of investing, this young adult generation is well ahead of the curve.

Investing in the stock market has become de rigueur among younger retail investors. That was evident earlier this year when young adults used a Reddit message board in a collective effort to dramatically inflate the stock price of GameStop – leading to billions of dollars in losses among Wall Street hedge fund investors.

Millennial retail investors are not content to set-and-forget their holdings. Instead, they like to trade actively and often, representing nearly a quarter of volume on peak trading days. Frequently referred to as “Robinhood investors,” millennials are interested in supporting companies with sustainable and environmentally friendly mission statements. According to a recent survey, 75% of millennials believe their investments can influence change, and 84% believe in allocating their money toward reducing poverty and income disparity.

In 2017, research by Morgan Stanley revealed that millennials are twice as likely to invest in companies targeting social or environmental goals. This is a trend that’s likely to continue. The same study said 94% of Generation Z believes companies should help address social and environmental issues.²

The good news for both demographics is that aligning their investments with their convictions doesn’t necessarily mean sacrificing returns. Morgan Stanley researchers hypothesize the amount of commitment – and dollars – younger generations are looking to invest in companies that share their worldview could wield both power and significant returns on their investments.

While long-term opportunities exist, it’s worth noting that many new retail investors have not yet experienced the agony of hard financial losses and short-term capital gains taxes. As they continue their empirical investment experience, it remains to be seen how much they will change the world or adapt to more traditional strategies.

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¹ Meagan Andrews. World Economic Forum. Feb. 9, 2021. “Asset manager group aims for carbon neutral investments by 2050.” https://www.weforum.org/agenda/2021/02/rise-millennial-investor-sustainable-world/. Accessed April 11, 2021.

² Margaret Choi. Morgan Stanley. Jan. 24, 2018. “How Younger Investors Could Reshape the World.” https://www.morganstanley.com/access/why-millennial-investors-are-different. Accessed April 11, 2021.

Content prepared by Kara Stefan Communications.

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