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A New Trend: The Modern Day Relationship Between Millennials and Investing

 7 min read / 

The great recession of 2008 resulted in many well-known repercussions, such as retirement funds being decimated and unemployment skyrocketing. One impact of the aggressive bear market of 2008 that is seldom discussed is how it shaped Millennials’ perception of not only the financial markets, but also the entire concept of investing.

The timing of the recession coincided with the coming of age of many Millennials, and images of plummeting equities being imprinted into the minds of people who had just begun their adult lives. Without a doubt, this would have tainted Millennials’ outlook on traditional investment activities and lead to them either holding a much lower risk threshold than their parents – in some cases completely avoiding investing – or having differing investment strategies and preferences. Millennials do have one of the largest advantages in relation to investing: the possibility of utilising compounding interest to its fullest extent. However, due to a lack of financial education, or ignorance (if you were to take a more cynical view), this advantage is being left squandered in low-interest bank accounts.

Why Aren’t Millennials Investing?

According to a BlackRock study, nearly half of all Millennials refrain from investing and describe it as being “too risky”. This perception of excessive risk is understandable: not only have the majority of them seen or experienced the crippling impact that the 2008 recession had, but the older section of them may have also witnessed the bursting of the dotcom bubble. Fear and distrust of the stock market seem to be substantial barriers which are preventing many Millennials from investing.

There is a common misconception amongst young people who have not engaged in much financial education that buying a few shares and attempting to “play” the stock market is the only way to invest. Images of sleepless nights spent watching prices and charts fluctuating on a screen whilst carefully planning entry and exit points using technical analysis may be the reality for some, but a much more passive and less risky approach can also yield returns much greater than those gained by simply saving your money in a bank account.

Apart from the exposure to two of the worst bear markets in the past century, there are other socio-economic factors which have deterred Millennials from investing- including high household costs, depressed wages, and the major issue of student loans. The summer of 2017 saw the total amount of student debt in the UK soar to above £100bn, meaning that many Millennials are burdened with large amounts of student debt, with the average debt of graduates in the UK expected to be just shy of £51,000 after interest rates on student loans are raised to 6.1%.

Millennials are clearly experiencing problems with having sufficient capital to invest- about 40% of Millennials claim that they are unable to invest as they believe that they do not have sufficient capital to do so, according to a financial literacy survey held by the financial app Stash. This claim may very well be true, as reported by an American survey by GOBankingRates. It found that 72% of “young millennials” aged between 18 and 24 have less than $1,000 in savings while those aged 25 to 34, which are known as “older millennials”, are not fairing much better with 67% having less than $1,000 in savings. However, some of this issue has been self-inflicted as this comes at the same time that a study held by Fidelity Investment found that 44% of Millennials described themselves as spenders when asked to describe their approaches to finances, while only 9% described themselves as investors.

What are the Priorities of Millennial Investors?

According to the research by the Morgan Stanley Institute for Sustainable Investing, 86% of Millennial investors are interested in “sustainable investing”, while another study by Morgan Stanley shows that 59% of Millennials believe that there is a trade-off between financial returns and social impact, leading to many referring to them as “not natural capitalists”. The priorities held by those Millennials who do decide to invest are far from those held by generation X or the baby- boomer generation. No longer is the act of investing only for financial returns; a lot greater emphasis has been put on socially responsible investments.

Millennials now choose to engage in “sustainable investments” and place their capital in corporations which protect the environment, lessen poverty, or encourage economic growth and human rights worldwide. The morality of investing in certain corporations, and profiting from the distribution of goods and/or services which may be detrimental to one’s wellbeing, is being questioned like never before. Examples include corporations who operate in the “sin industries” and create products such as tobacco and alcohol, as well as gambling institutions. There has also been a recent surge in the interest in corporations that produce renewable energy and those are viewed as being beneficial to society.

Source: Visiual Capitalist

Green bonds, like normal bonds, are debt instruments which are issued to fund environmentally friendly projects undertaken by firms specialising in the production of renewable energy. Having been first introduced in 2007 by an investment bank in Luxemburg, the recent trend in the issue of these specific type of bonds clearly shows the shift in demand towards “sustainable investing“. Demand has increased to such an extent that now several countries are also issuing

Demand has increased to such an extent that now several countries are also issuing green bonds. Poland was the first to issue sovereign green bonds in December 2015, and the country was closely followed by France and Argentina. The total issuance of green bonds almost doubled from 2015 to 2016 to reach approximately $80bn. With $19bn of green bonds issued during the first two months of 2017, it is expected that the total issuance in 2017 will substantially increase from its 2016 level. Moody’s Investor Services projects it to reach $120bn by the end of the year.

Source: Climate Bonds Initiative

The Impact Millennials Will Have on the Future of Finance

Although Millennials currently fail to match the investing rates of older generations, those who do engage in it will ultimately change its future. According to Goldman Sachs, the Millennial generation is the largest in history and, as a result, will have a much greater influence in the shaping of economic trends than the Baby Boomers did. An estimated £30trn in assets is expected to be passed from the Baby Boomer generation to Millennials in the coming years, so it is inevitable that financial industries and corporations will have to make stark changes to be able to cater for this.

Certain trends in how Millennials invest are clear- many prefer access to ownership, experiences over possessions and have little brand loyalty. Some of these are part of the reason for the success of Airbnb and Uber at the cost of more traditional firms in the travelling and transportation industries over recent times. Many traditional procedures, such as business loans being granted by banks, are now being questioned and are instead being replaced by innovative alternatives such as peer-to-peer lending. Millennials also prioritize their time much more than their elders and therefore show a much greater demand for goods and services which are convenient and allow for greater free time.

As a result of this, it can be said that that actively managing investment portfolios is not high up on young peoples’ agenda. This may lead to an increase in passive investments such as ETFs (funds which track and attempt to emulate the performance of a certain index, commodity etc.). In addition to this, due to a lack of confidence in traditional investing practices and those responsible for managing them, it could be ascertained that portfolios managed by AI and ones which receive signals from algorithms will boom in popularity in the near future.


Due to their youth, the returns on many sustainable investments are relatively unknown, and only time will tell whether they turn out to be financially viable. One thing, however, is for sure: firms must place the utmost importance on their procedures and public image, because long gone are the times when impressive financial returns could excuse questionable corporate morality.

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