Do millennials have super-short attention spans? When it comes to their appetite for advertising and marketing content, the jury is still out—but when it comes to investing in companies they believe in, our research shows that millennials aren’t easily distracted by near-term volatility.
We recently took a deep dive into our proprietary data on stock positions in the self-directed accounts of digital investors and complied our key insights in a new report. In the second installment of our three-part blog series, we illustrate how millennials are maintaining conviction in certain stocks, despite price declines and negative headlines.
Taking the long view with companies they believe in
Our data shows that millennials are investing not just based on what they know—such as innovative technology—but what they believe in. And once they have established conviction in a company, millennials are in it for the long run—they aren’t flinching in the face of near-term volatility.
Sticking with Tesla
The new generation of investors has stuck with Tesla through various production problems and controversies. This strongly indicates that Tesla’s millennial investors—and their Generation X counterparts, as Tesla is the 5th largest holding for both groups—believe in CEO Elon Musk and his mission to accelerate the world’s transition to sustainable energy, whether because they believe in the economic future of the company, in the intrinsic value of its mission or both.
Maintaining conviction in social media stocks
With regard to their social media stocks, millennial investors are buying and holding on to companies they feel an emotional connection to, regardless of near-term market volatility. In fact, the millennials are often buying the dips: We have seen the number of positions in several battered social media companies increase during times of share price declines.
Consider the share price declines seen by several companies between July 31, 2018 and September 14, 2018 and how millennial investors reacted:
- Twitter: Share price decreased -5.49%
- Moved up one spot to rank 16th and number of positions increased by 7,735
- • Facebook: Share price decreased -5.94%
- Ranking unchanged and number of positions increased by 13,663
- • Snap: Share price decreased -25.68%
- Slid five spots to 29th due to extreme stock price decline, but number of positions increased by 7,032
Taking a closer look at Facebook, the company’s stock price dropped 19% over a short period in July, erasing as much as $145 billion in market cap. Nevertheless, younger investors held firm. In fact, many saw it as an opportunity to buy, increasing their position in the company by 34% during that time frame.
Why does it matter?
Millennials are an enormous demographic, totaling more than 70 million Americans—that’s roughly one in every five Americans you meet. Besides the group’s sheer size, two key things are happening right now from an investment perspective:
- First, millennials are just entering their prime earning years.
- Second, they’re about to inherit an enormous amount of wealth. By 2030, millennials are expected to hold roughly $20 trillion in assets, representing a five-fold increase versus today.
Millennials are already making their mark on investing—but most of traditional Wall Street is just waking up to this reality.
When we undertook our broader research project, it was our goal to build a better understanding of the new generation of investors who are driving the future of digital wealth. Specifically, we believe the report can be a valuable tool for financial services companies aiming to win them as clients. Dramatic change happens when market powers shift, which is exactly what’s happening today in wealth management. As millennials become a more influential force, those who understand them and embrace the accompanying changes will undoubtedly be positioned to come out ahead.
Opportunities for financial services providers
For advisory practices and financial services firms interested in working with millennials, the findings illustrated here highlight several opportunities to take action, including:
- Weaving investors’ motivations into discussions about financial and investment objectives, and, when appropriate, adapting investment strategies to include unique exposures.
- Offering education around concepts like diversification, asset allocation and portfolio construction to help younger investors understand and adopt best practices, given millennials’ high levels of exposure to individual stocks.
For more details about our proprietary data, the full findings and what they mean for financial services providers, check out the latest set of insights.