When it comes to the stock market, millennials are a bit apathetic.
In an interview with MarketWatch, TD Ameritrade Managing Director of Trading Nicole Sherrod commented on this predisposition: “Young people have more brand familiarity with companies like Amazon, Google and Twitter. For retail investors in general, regardless of their age, they tend to invest in what they know. The main difference is that the different demographics know different companies.”
Millennials reportedly lean towards technology and “other innovation-oriented companies,” while older generations tend to invest in healthcare companies. Brand familiarity goes a long way on Wall Street.
Millennials have also taken to “robo-adviser” start-ups like Wealthfront and Betterment. These online investment management sites essentially manage your investments for you, allowing you to mentally check out after your trip to the stock exchange.
Both companies boast a low investment fee (Wealthfront requires a minimum investment of $5,000 while Betterment has no minimum) and a simplistic investment model in which you don’t even have to communicate with a real person.
These services are tailor-made for the heavily indebted, technology-dependent millennial whose capped financial knowledge is often a hindrance. CEO Adam Nash attributes Wealthfront’s millennial popularity to the low maintenance “set it and forget it” mentality: “Millennials want to focus on things like their career, friends and family. While they know managing their money is important, they don’t want to spend time watching their investments every day.”
It’s great that millennials are getting their investing feet wet. Especially since they’re in the ideal position to start investing.
However, many of these somewhat impulsive and “no fuss” investment strategies aren’t exactly the best practices, especially for debt-laden college graduates who could stand to make a few extra bucks and have a clue as to how they’re doing so.
Successful investing requires shrewd analysis and basic financial education. This investment “philosophy” instead relies on the opposite: luck, chance and hope that just maybe your favorite brand will make you some side cash. The last thing we need is another excuse to skip out on financial literacy 101.
This “whatever happens, happens” investment strategy closely aligns with the experience generation narrative. Both ways of thinking are short-sighted and impulsive, capitalizing on “the moment” rather than the bigger picture. Both are also examples of the financial illiteracy common to the millennial generation.
Do you invest in the stock market? What informs your investment decisions? Share your experience in the comments below or on our Facebook page.