As Millennials age, more and more are beginning to pursue a variety of investments. However, not everyone in this generation is handling their investment plans wisely, and the results could affect the economy at large.
Initial Investment Funds
Despite being the youngest generation actively looking at investing, Millennials might be lacking in some of the basic financial knowledge necessary to plan for investment. Millennial spending patterns tend to not be the most conducive to saving for future investments; Millennials are predicted to spend $1.4 trillion on travel alone each year by 2020. When spending this much on travel and short-term factors, it can be difficult to properly save for significant investments in areas like stocks, bonds, or real estate. With fewer savings set aside, investing can be a riskier business for this young generation, as any losses are felt far more heavily.
One of the most notable differences in the way the Millennial generation invests what funds they do have available ultimately comes down to what gets them to invest in certain companies. More than other generations, Millennials are heavily influenced by social causes; this leads them to invest more frequently in environmental, social, and governmental enterprises.
As Millennials recover from the economic upheavals of 2008 and repair their debt, many are committed to investing their money towards companies that they feel represent their ideals. However, this tends to make Millennials more emotional in their investing habits. Stocks tend to make for better long-term investments, but because Millennials tend to have a more emotional investment in the way their stocks, they may be more tempted to sell too soon. This can result in greater losses and riskier investments for this young generation.
Real Differences In Real Estate
Stocks and bonds aren’t the only way Millennials are choosing to invest their money. According to the Real Estate Investing Report, 55% of Millennials are interested in investing in real estate, the highest percentage of all demographics questioned. This interest in real estate directly contradicts with what might be expected of this generation, who grew up surrounded by the infamous burst of the housing bubble. However, Millennials are often seeing real estate as a more stable investment than the stock market, leading them to invest in this opportunity at a higher rate than their older counterparts.
This has been having a significant effect on the housing market, with Millennials making up almost a third of the entire home-buying population of 2017. Additionally, there’s no guarantee that the housing market is inherently the safer investment. Stocks frequently rise and fall, and these changes tend to scare Millennials towards more tangible investments like real estate. However, these markets can be just as volatile.
It remains to be seen whether this will help the economy recover from the struggles it faced in 2008, or if it will cause a similar bubble to burst again in the near future. Millennial investment patterns will likely shape the future of the economy, but as it currently stands, there is no way to guarantee the result of these changing investment habits.