Can millennials influence your investments?

POSTED: 19th October 2016
IN: Personal News

Millennials. From taking pictures of their food to expressing themselves online, Generation Y are a new phenomenon. At Aldermore, we’re discussing whether their habits, including how they spend, could have an effect on your investments.

With their smartphones, selfie sticks and disparate spending habits, it’s clear that millennials are doing things differently. Like any generation, influencing the world is commonplace; but as 'Gen Y' account for a population of 1.7 billion people globally, in some countries surpassing the number of baby boomers, what should you expect from this generation and, more importantly, how could they affect your investments?

Who are millennials?

The generation born between the early 1980s and 2000, these young adults have been brought up with the internet, embraced a technological revolution and lived through a recession. It’s these significant changes collectively that has led to millennials, or Gen Y, thinking and behaving differently from their parents.

As parents, you’ve probably been asked to take pictures of your child before a night out for ‘Facebook’; you’re probably tired of mobile phones at the dinner table, and you possibly think that they spend too much money on eating out or going on holiday with friends. However, despite millennials being labelled as ‘Generation Me’, this group are actually more globally aware than other generations, embrace environmental and social issues, and are paving the way for continuous technological development.

Millennials spend their money differently

As the biggest generation in western history, it’s no surprise that this group’s spending habits can affect the global economy and subsequently, investments. According to research by Eventbrite, 78% of millennials prefer to spend money on an experience rather than material items, while 82% of millennials have enjoyed various events in the past year, such as music concerts, festivals, theatre productions and sporting events. Subsequently, investing in live events and those that focus around making memories could be more beneficial for investors.

Millennials have aided a sharing economy

Assisted by the growth of the internet, a shared economy is on the increase – and fully embraced by millennials. To put it simply, many young adults, part of Gen Y, are choosing different ways of purchasing. Instead of buying CDs, millennials are more likely to use a music-streaming service like Spotify, while others opt for a car-share service as an alternative to purchasing their own vehicle. With possession not as prevalent in this generation, it has led to a disruption in business models, and many companies are struggling to redefine their products to suit this developing demographic.

How do millennials invest?

Alongside the products and services of what this generation value being different, how millennials invest is also dissimilar. Only one in three millennials invest in the stock market; for many it’s simply unaffordable. For those that do invest, they’ll use apps, social media and websites for research, and look for investments that meet their social concerns.

A 2015 study by Morgan Stanley found millennials are twice as likely to invest in companies or funds that target specific social or environmental outcomes. High net worth millennials were more likely to undertake positive screening (36%), while common investments chosen by this group were funds that create positive change and clean energy funds. Examples of ethical investments include placing funds in companies that prioritise workers’ rights and workplace equality, ones that pollute less and derive their revenues from sustainable products.

So, what does this mean for you?

For your investments, stocks in companies that cater to Generation Y’s unique buying habits and social beliefs could rise – such as funds in leisure, sustainability and technology, while more traditional investment strategies, such as placing funds in arms, nuclear power and tobacco may fall.

Interestingly, Global X Funds have launched an exchange traded fund that takes advantage of Gen Y’s spending habits. The fund has named LinkedIn, Amazon, eBay, Expedia and Apple as companies who could benefit from Gen Y’s increasing buying power and growth, to name but a few.

While investments are never guaranteed, one thing’s for certain; millennials, aided by their attitudes and with their phone in hand, will continue to redefine the world – but you never know, they might actually just be checking how their investments are performing.

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