Market Outlook

Millennial investors are turning tactical

Millennials have come of age. As those born between 1981 and 1996 enter their peak spending age, where and how they invest is looking quite different to previous generations.

According to a 2019 survey of 2,000 millennials by Ally Financial, 85% are already investing in the markets, with 85% of those netting an average $2,527.

Low barriers to entry have made it possible for young investors to gain access to the market, which has coincided with a surge in demand across online trading platforms such as Robinhood, eToro and Raging Bull.

85%

of millennials are investing in the markets

 

Even throughout the current coronavirus pandemic downturn, there’s been a rush to trade on these platforms. Wealthsimple, for example, noted a 54% increase in new users through March. It has been adding more at a weekly rate of 7,000, over half of which are aged 34 or under, CNBC reports.

Frank Lietke, senior director of Ally Invest, a trading platform specifically catering to younger investors, found that millennials made up 70% of equity trades that were buys between 24 March and 24 April. “Millennials are a bigger share of the pie in terms of total accounts,” Lietke told Cheddar.

CMC Markets’ own proprietary data also confirms a decline in trading across older demographics in the first four months of the year, whereas the number of trades conducted by millennials has risen 5.9% between the start of the year and April.

5.9%

Rise in the number of trades conducted by millennials on the CMC Markets platform between start of the year and April

 

Fearless millennials buy the dip TD Ameritrade, another online broker, also noted a significant rise in equity purchases in the last two weeks of March.

“It was like somebody pulled the plug and said: time to buy, these stocks are just so low,” JJ Kinahan, chief market strategist at TD Ameritrade, told Bloomberg.

Indeed, in the first half of March, the S&P 500 had fallen more than 19%, during which time the firm reported that trading had hit a seven-year low.

The timing of the uptick suggests that millennials took a strategic entry point, targeting companies with large cash flows and lower volatility. The other half settled on safer assets with less involvement, such as exchange-traded funds (ETFs).

As a result of their bullish calls, millennials’ reputation among investors has improved significantly. “There was a knock on millennials that they weren’t the brightest investors,” Barry Schwartz, chief investment officer at Baskin Wealth Management, told the Financial Post.

“Certainly, I learned a lesson that they had the foresight and the patience and a longer-term lens than we gave them credit for.”

For a generation that has witnessed financial crashes, it would have been safe to assume a healthy amount of hesitation but perhaps the fact that they’ve seen stock markets rise from the ashes before is the faith they’re buying into.

“I believe our generation has proven itself time and time again to be innovative, to be creative, to figure out how to make things work when dealt a bad hand” - Erin Lowry, a millennial investor & author

 

“I believe our generation has proven itself time and time again to be innovative, to be creative, to figure out how to make things work when dealt a bad hand,” Erin Lowry, a millennial investor and author of Broke Millennial: Stop Scraping By and Get Your Financial Life Together, told Cheddar.

“So I tend to think we’re going to come out of this not only okay but figure out how to make something better.”

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