Millennial wealth has doubled since the outbreak of the pandemic, and they’re using that money to invest in their future.
Despite the doom and gloom headlines, millennials have actually been doing quite well. Overall, today’s 26- to 39-year-olds are better off financially than previous generations at the same age. Inflation-adjusted, they have higher net worths, higher incomes, and more financial assets.
They’re also much more educated: 69% have some education beyond high school, compared to just 54% of baby boomers. All of this has put them in a strong position to weather volatile economic conditions and emerge even wealthier on the other side.
Planning For Retirement
All this capital has led to interesting changes in how millennials invest. For one, they’re much more focused on retirement planning than previous generations.
According to recent research, nearly 90% of millennials have some kind of retirement plan, compared with just 73% of baby boomers at their age. And they’re putting more money away, too, contributing 10% of their annual income to retirement accounts, on average, compared to just 5% from boomers.
What’s more, millennials are much more likely to see retirement as a multi-stage process. They’re not just focused on getting their nest egg in order; they’re also planning for things like travel and leisure activities, starting businesses, and “unretiring” to do work they love.
The New Generation of Investors
For decades, a 60/40 portfolio mix of stocks and bonds has been the standard advice for investors. But millennials are shaking things up, opting for a more diverse mix of investments that includes alternatives like private equity, venture capital, and cryptocurrency.
They’re joining institutional investors in recognizing that the traditional 60/40 portfolio is dead. Indeed, the average UHNW investor allocates 46% of their portfolio to alternatives, not bonds, according to a study by KKR.
There are several drivers of this shift. Primarily, young people stand to make dismal returns on traditional investments. With bond yields at constant lows, banks predicting a major recession, and rampant inflation eating away at the value of cash, it’s no wonder millennials are fleeing to potentially more rewarding investments.
In fact, millennials own more crypto than any other generation, which is no surprise for such a digitally-native cohort. They’re also more likely to invest in private companies, through vehicles like venture capital and private equity, at early stages when there’s more potential for growth.
While just 33% of millennials invest in the stock market, nearly 75% plan to use an alternative investment approach over the next 5 years. Unsurprisingly, 89% of alternative investment providers target millennials.
Shifting Norms
It’s not just about the money, either. Millennials are also motivated by a desire to do good with their investments. They want to put their money into companies and causes that are making a positive social or environmental impact.
This is reflected in the growth of impact investing, which aims to screen out companies with poor environmental, social, and governance practices. Ultimately, millennials’ bank balances are growing, and they’re looking for higher-return investments that can weather a volatile economic climate. With more money and options, they’re reshaping the investing landscape.
Historically, creating a diverse portfolio of alternative investments has been subject to high capital minimums and fees. Gridline has changed that by opening up access to top-quartile private market alternative investments, previously only available to sophisticated family offices and endowments. Individual investors can now invest transparent, efficient, and lower-costly.