Millennial Investment Habits Endure Amid COVID-19 Pandemic

For most millennials, the current COVID-19 pandemic is the first serious economic crisis they’ll face as investors. The Q1 2020 release of the Apex Millennial 100, a ranking of the top 100 stocks owned by a subset of millennials, revealed that younger investors are sticking to their core investment habits during this unprecedented time.

Although the global pandemic has the potential to change the millennial worldview, it hasn’t yet impacted the generation’s commitment to certain companies--a theme possibly underscored by the fact that most of the companies’ stocks have outperformed over the longer term and continue to be a significant part of investors’ lives. As we illustrate below, their commitment has been largely beneficial—a lesson in the widely touted advantages of staying the course amid difficult market conditions.

Top 10 positions serve as a source of strength

Compared to the previous quarter’s top 10 holdings, millennial investors held steady, resulting in no ranking changes. Additionally, the top 10 continued to represent a large chunk of the Apex Millennial 100 (52%). On average, stocks in the top 10 were down approximately 5% for the quarter—dramatically outperforming broader market measures such as the S&P 500 Index, which declined roughly 20%.[1] Shares of Tesla (#3) advanced 25%, Amazon (#2) was up 5% and Netflix (#8) posted a 16% gain.[2] These notable advances in the top 10 coupled with their meaningful portfolio weights likely helped insulate many millennial investors from the full pain of the first-quarter sell-off.

Buying the dips: Scooping up shares of favorites when prices decline

As we have observed in previous Next Investor Outlook Reports, millennials often maintain conviction in their investments despite near-term volatility. In many instances, millennials add to their existing positions when share prices decline, capturing the dips as buying opportunities—a habit that prevailed in Q1 2020 despite the exceptional market and economic environment triggered by COVID-19.

For example, millennials increased their holdings in Uber during the quarter, pushing it from #28 to #17 in the Apex Millennial 100. Like other prominent holdings noted above, shares of Uber outperformed the broader market, declining just 6% for the quarter.[3] Sentiment was boosted in late March when Uber CEO Dara Khosrowshahi told investors that the company is “well positioned to weather this crisis and to emerge even stronger.”[4] Millennials also added to their existing positions in ride-sharing company Lyft, which ranks #67.

Notably, the degree of commitment to Uber and Lyft is unique to the younger generation: Uber ranks #90 among boomers and fails to crack the top 100 for the silent generation. Lyft is even less favored, falling short of the top 100 for both boomers and silent generation investors.

Still looking to the future

Our analysis of millennial investors has also revealed a preference to put their money behind companies that are rooted in technology and driving disruption in their respective industries. This multi-year trend was once again evident in Q1 2020 as space-tourism and technology company, Virgin Galactic, made its debut on the Apex Millennial 100 at #80. This ambitious early-stage company plans to take people on flights to the edge of space and recently reported that inquiries into its tourism program have more than doubled since year-end 2019.[5]

What this means for financial service providers

For advisory practices and financial services firms interested in working with millennials, we believe this data provides actionable insight. Savvy providers are weaving millennial investors’ motivations into discussions about financial and investment objectives, and when appropriate, adapting investment strategies to include unique exposures. Forward-thinking providers are also recognizing that younger investors may have deep commitments to their investment habits—even in the face of a global pandemic—and are identifying ways to derive benefit from this stay-the-course mentality.