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The Millennial Strategy Meets Investing

July 08, 2016

The investment world has finally caught up with the mainstream, slapping the word millennial onto gobs of daily content. Being of the said generation, where home loans have been replaced by student loans, I was shocked. Call me pessimistic, but I tend to lean toward the glass is “exactly this full” approach. If we look into the data behind those 80 million Americans, there is a story that becomes very clear. Many millennials don’t have money.

The average income for a 20 - 30 something comes in at $30,000, and is most likely coupled with long or short term debt, and a -1% savings growth. How do these new adults actually live? The stats provide a pretty bleak short term outlook for new investors. They also show that marketers are vying to reach an audience that is about the size of the population of Washington. Whether this marketing strategy is brilliant or misjudged is yet to be seen. But there is a silver lining for a long term outlook, and for equity crowdfunding platforms looking to grab a larger piece of the investment market.

Big Data

Hearing the words big data may trigger a massive eye roll, but it’s an important phrase that sheds light on how these millennial investors are able to stretch their dollar. In a recent study, 75% of millennials admitted to carefully tracking their income, which is almost a 20% increase from the prior generation. The rise in Fintech also adds credence to the rise of a newer smarter investor. With a wealth of new tools, millennials are leveraging the “do more with less” strategy they deal with in the workplace, and putting it into practice with their personal finances.

Impact Investing

While shiny new applications are growing in popularity, strategy for millennials is far from robotic. Impact investing has become another buzzword that explains how this new generation qualifies a good investment. While brand loyalty is still very important, it seems that millennial investing is more interested in socially responsible businesses. With investments decisions becoming an economic expression of our culture and values, the rise of investing in environmental, social, and corporate governance is an indication that millennials are investing in companies making a difference in the world.

Equity Crowdfunding

The concept seems to be resonating, but there is always the trial and error stage that comes with any new strategy. Until that strategy reaches critical mass, most new investors are going to have a difficulty incorporating ESGs into their portfolio due to scarcity and high price points. Along with that, comes the fact that most millennials  have lost faith in the market. While marketers from traditional investment entities scramble to catch the attention of a new small pool of investors, equity crowdfunding sites may have the foundation to capitalize on a need that is not being fulfilled.  

Those platforms need to start with education. The best way to gain visibility in an overcrowded space is to differentiate yourself. While “Top 10” lists provide catchy clickbait, this up and coming generation is willing to read, watch, or listen to information that is going to give them an edge. After taking a personal finance class, 24 year old David Sotolotto talked about the benefits of understanding the investment space, “It taught me what to look for… and got me into looking at companies I hadn’t heard of.” The opportunity is there, but the infancy of the equity funding space has not yet captured the attention of the masses.

Final Thoughts

While equity funding sites stress the importance of startups activating their communities for their Regulation CF fundraise, they need to be adopting the same advice. If we look at the renaissance of crowdfunding, Kickstarter saw success because of their founders dedication to nurturing their community. That community fueled their initial growth, and success bred success when campaigns garnered national attention. There is a small but passionate community of young investors who were raised in a generation where most of their peers didn’t know how to balance a checkbook, until they got hit with overdraft fees. From personal experience, it is safe to say many Millennials never learned the the basics of finance from their parents or educators. As we see more Baby Boomers opting out of retirement, it’s evident that their successors will need to actively grow their financial knowledge and investment strategies to avoid the same fate.

 

Educate Yourself

We hope to make this blog a great source of education, but here are a few links that I personally recommend to help with your future finance strategy. I’m not promising that they will turn your financial life around, but they provide a good foundation for educating yourself on finances.

  1. Manage Your Student Loan Debt
  2. Financial Food Pyramid
  3. Managing Retirement
  4. Investment 101
  5. Nerdwallet


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