So, when it comes to investing, millennials seek out sectors focused on technology or that lean heavily on technological progress. Electronic equipment makes up the biggest chunk of their portfolios compared to other economic sectors, highlighting a deeper understanding and belief in the importance of this sector. That’s just one of the key insights that emerged from the Next Investor Outlook, our quarterly report on these investors.
At Apex Clearing, we get an inside look into the behaviors of millions of investors, including millennials, as a result of our partnerships with the financial industry’s leading online investing platforms. We winnowed through our proprietary data on stock positions in self-directed accounts to get a read on how millennials were investing during the third quarter of 2019. Our outlook report delivers a summary of what we found.
Focusing on innovative technology
Like many investors, millennials lean toward what they know. And one thing that’s had a direct impact on their lives is innovative technology that disrupts markets and drives new trends. Some of these innovative tech products include Apple’s iconic iPhone, Microsoft’s HoloLens virtual reality headset, or even its Kinect technology for the Xbox that translates body movements and gestures into on-screen actions.
Both companies were among millennials’ biggest stock holdings in the third quarter, landing within the top 10 equity positions of the 100 our outlook report tracks. Semiconductor manufacturer Advanced Micro Devices and chipmaker Nvidia also ranked high among millennial holdings. Overall, this generation has plowed a substantial amount of its stock investments into electronic equipment, which represents 11.4 percent of their total portfolios while making up just 3.9% of the Standard & Poor’s 500.
The auto sector also grabbed a substantial portion of millennial dollars, making up 7.1 percent of their investment portfolios, a huge share compared to automotive companies’ 0.3 percent slice of the S&P 500.
Tesla, the No. 3 holding for millennials, is a clear example of how these investors see the cars of the future: electric-powered and self-driving. Competitors General Motors and Ford also held spots in the top 100 investments for this generation. Last year, GM rolled back its end-of-2019 target for the rollout of self-driving vehicles, but Ford is still committed to a 2021 delivery schedule for a so-called purpose-built self-driving car. Ford did say the vehicle’s capabilities would be more limited than it had originally planned.
Why does it matter?
Millennials are now the largest U.S. generation, with 75.4 million members. Baby Boomers declined to 74.9 million last year as the members of that generation, which peaked at about 79 million in 1999, died off. Two key facts make millennials an important demographic for the financial industry:
- They’re in their peak earning years, so they’ve got more cash to invest. They already make up half the global workforce and are expected to account for 75 percent of workers in the United States by 2025
- Second, they’re set to benefit from a massive windfall. Millennials in North America will inherit more than $30 trillion by 2030, according to an Accenture report.
For money management or financial advisory firms interested in working with millennials, our findings suggest several opportunities.
- Emphasize the importance of reaching beyond personal experience and knowledge to build a balanced portfolio and ensure risk exposures are not excessively high.
- Adapt investment strategies to include some targeted stakes in companies positioned to capitalize in evolving market trends. This is one way to ensure millennials’ interests and motivations are addressed in their investments.
For more details about our proprietary data, the full findings and what they mean for financial services providers, view the data: