Why 70% of Millennials Don’t Invest in the Stock Market — and Why They Should
Investing in the stock market is a top tip from finance experts, but millennials are often resistant to this advice. According to some research, millennials do not take advantage of investing in the stock market, which is likely leading to profound missed financial opportunities.
Brokers noted that, according to multiple studies, just 30% of millennials invest in the stock market, compared to 51% of baby boomers.
Why are millennials unwilling to invest in the stock market?
Millennials Have Seen Some Serious Stock Market Volatility
The trauma of the Great Recession was, and still could be, full blown for millennials, many of whom were just setting out into the professional world when it hit. Stock market plunges during the pandemic are also an influencer. Because of what they saw and experienced, millennials may be afraid to invest.
“Truthfully, it’s the same reason that folks born in the 1920s didn’t invest much: fear of financial markets,” said Paw Vej, COO at Financer.com. “Millennials have witnessed the dot-com bubble burst, the global financial crisis [in 2008] and all other subsequent crashes, including the COVID-19 pandemic, in the last two decades. In my lifetime, there have been three major crashes: ’87, ’00 and ’08. That should be enough to deter many millennials from investing.”
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Lack of Understanding
Also playing a role in the millennial resistance to investing is, perhaps, a lack of understanding about how the stock market operates.
“Most [millennials] understand very little about the stock market,” Vej said, “and if they do, it’s only about what it is, not how it works or how to participate, much less the vocabulary and understanding required for actual trading.
“It wasn’t taught in school; and, to most, it appears to be someone else’s problem. Furthermore, the majority of millennial occupations are not corporate jobs with perks. Most people will never get their feet wet if their workplace does not offer a 401(k) or other type of savings.”
Inflation
Inflation has all but decimated bank accounts across generations, and millennials aren’t immune to these blows. High inflation could be deterring them from taking the leap into investing.
“Millennials [may be] nervous about their investments during an inflationary environment or recession — with that fear prompting them from investing in the stock market or to stop investing altogether,” said Jennifer Garcia, a private wealth financial advisor for Wells Fargo Advisors.
Financial Constraints
Between the Great Recession, the pandemic, high inflation and the onus of student loan debt, many millennials are experiencing financial instability.
“High levels of student loan debt, stagnant wages and the rising cost of living can make it difficult for them to allocate funds for investments,” said Paxton Driscoll, a financial advisor with Florida Financial Advisors.
Emotional Biases
“Behavioral biases such as loss aversion or the fear of missing out can impact investment decisions,” Driscoll said. “Millennials, like any other generation, may succumb to these biases, affecting their willingness to invest in the stock market.”
Loyalty to Crypto
Another possible reason that millennials aren’t investing in the stock market is that many of them believe they can get higher returns by investing in digital assets.
“According to Finder’s Cryptocurrency Adoption Index, 60% of millennials consider crypto a good investment and 37% say they own crypto,” said Frank Corva, senior analyst for digital assets at Finder.
Wanting To Get Rich Sooner Than Later
Making money off stocks is a slow burn. Millennials may be more interested in making cash quickly.
“This [behavior] is summarized nicely by this quote from Warren Buffett,” said Robert R. Johnson, Ph.D., and professor of finance at Heider College of Business at Creighton University. “Jeff Bezos once asked Warren Buffett, ‘You are the second-richest man in the world and yet you have the simplest investment thesis. How come others didn’t follow this?’ To which Warren Buffett responded, ‘Because no one wants to get rich slowly.’
“What Buffett is referring to here is his philosophy of investing in good companies and staying invested for the long run, letting compounding work its magic.”
Bottom Line: It’s Time To Start Investing in the Stock Market
Millennials, if you’ve been on the fence to invest, know that it’s in your best interest to dive in sooner than later. If you’re concerned, consider that there are plenty of free resources to help you get started.
“The beauty of today’s world of finance is that there are free resources on YouTube, Twitter and finance websites to learn about investing,” said Gav Blaxberg, CEO of Wolf Financial.
Blaxberg also recommends finding someone to help you learn the ropes of investing.
“One of the first tips I give on investing in the stock market is to find a mentor,” Blaxberg said. “Use personal and professional relationships to discover an individual who has the experience you want. Spend ample time talking with them to explore whether their analyses and thought processes align with your financial endeavors.”
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