Millennials Investing Less, Trading More

Everyone trades, especially millennials. It’s a trading generation. But it’s not much of an investing generation. Why is that? Fear and technology, it would seem, are the primary reasons, but a secondary reason is that Millennials simply have less money set aside to invest.

Everyone trades. That’s the impression you might get if you browse a search engine with the keyword “trading.” The internet is full of ads saying that you can become a trader in no time. There’s a wide choice of online trading platforms and mobile trading apps that make it possible to trade whenever you feel like it without having to use the help of professionals.

Millennials are, by and large, afraid of venturing into investments–and they like their apps.

Here’s one study from last year, commissioned by an investment app maker, Stash. The study found that millennials are confused by the stock market. This might sound decidedly weird for a Gen-Xer who has trouble grasping the subtleties of day trading, but it seems to be a sentiment shared by many Millennials.

Almost 80% of the sample in this research said they were not investing. Of that 80%, only 13% said they were not investing because they were still repaying student debt. By the way, that’s a very legitimate reason for staying away from the stock market: student debt loads have been rising steadily over the last two decades, at least, while average income has been falling. A lot of Millennials simply lack the financial comfort to start investing.

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This attitude was reflected in the study: 41% thought they didn’t have the money to start investing, with 70% believing you need only $100 to start. But that’s far from all. There are also stereotypes at play, with a 60% majority of women respondents in the survey saying that for them, the image of an investor was an old, white man. That’s an image that young women would certainly find hard to relate to. Half of the men respondents agreed with the stereotype, too.

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Millennials invest less and it’s hard to relate to the typical image—or what they believe is the typical image—of an investor. By the way, they also can’t relate easily to financial advisors. Too many of them, it appears, are just too old to be relatable, which is why now there is a new segment of advisors emerging that specialize in advising Millennials.

Another reason the generation of those born between 1982 and the early 2000s find investing not particularly relevant is that they are just entering the job market. They have decades to retirement, so many of them believe it’s too early to start thinking about making a nest egg of stocks. A survey from Bankrate found that one-third of Millennials invested, but that’s an average – the younger the respondents, the less likely they are to invest.

It’s not because Millennials are irresponsible. Bankrate confirmed the findings of the older research for the most part. Lack of what they deem sufficient funds to start investing is one reason for staying away from the securities market. The other is that they just don’t know much about stocks and bonds. The ones they do seem to know about are the stocks of companies whose services they use on a regular basis. Enter the top tech companies in the USA.

The minority of Millennials that do invest stick overwhelmingly to shares of companies such as Apple, Facebook, Amazon, Netflix, and Tesla. Of course, a lot of investors hold stocks in companies whose products and services they use, but that’s never the only reason for buying a certain stock. Yet Millennials seem to think differently, and as we’ve noted in a previous article, they don’t care about dividends—at all.

So that brings us to trading. Why do millennials trade? The answer to this one is easy. Because they can. There are dozens of trading apps out there. You can sometimes (not always) trade even with less than $100, and trading is exciting, after all. YOLO anyone? (If you’re not a Millennial, you’ll want to look that up in the Urban Dictionary). Trading is quicker. You don’t have to wait years to get a return on the money you put in a trade. Evidence? This survey that found 40% of millennials are into options trading, versus just 25% of their Gen-X parents.

Millennials are the first digital-native generation. They are the most connected generation. In the digital world, everything is fast, and Millennials seem to like things to happen fast (you’ve heard the term ‘instant gratification’).

While they say they are wary of robo-advisors because they want to have the decision making control when it comes to spending their money, the tech savvy has made them more likely to trade than invest, more so than previous generations. Life is faster today, and millennials are grabbing the moment.

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