Field of Play
The oldest were 28 when the Financial Crisis hit in 2008
As an older investor, and I guess anyone over 50 is getting on in years, I think it useful to understand what the younger generation is getting up to when it comes to investing. Let’s look at Millennials. My question is whether they are a bunch of wild eyed Robinhood punters as depicted in media reports we have all seen.
Meet the Millennials
The Millennial generation is the population cohort born between 1980 and 2000. It is the largest generation in North American history. It is half as big again as Generation X. It is significantly larger than the Baby Boomer generation. Today it is reaching its prime working age and prime spending years. It is also reaching its prime investing stage of life.
Millennials grew up during a time of technological change, particularly a digital transformation. In the 1980s the economy began to transform from the age of tangible assets and enter a world of intangible assets, networks, platforms and the like. Sophisticated global supply chains blossomed and morphed. China entered the world stage.
In the early 1980s the U.S. had 14 percent unemployment, 15 percent inflation, and a 20-percent prime rate. As Millennials were growing up all those numbers gradually but inexorably came down. The Dot Com bubble expanded and popped in their youth. It’s fair to say that Millennials grew up in a different era than their parents. Their attitudes, behaviors and experiences were certainly different than the Boomer generation.
The Great Financial Crisis
The oldest were 28 when the Financial Crisis hit in 2008. At that age they would have been starting to think about saving for retirement and getting into investing.
Inheriting $22 trillion
Today, in 2020, the Millennial generation is engaged in earning, saving and investing. It will also inherit wealth from the Boomers. The Economist magazine, in an October 24, 2020 article, referred to an estimate that over the next twenty years Millennials will inherit some $22 trillion from their parents. A sizable portion of this money will be invested.
Different generations have different attitudes to investing and different approaches. My parents’ view was seared by the Great Depression of the 1930s. When I started saving and investing the Nifty Fifty boom of the late 1960s was in swing and I was just in time to witness the stock market collapse of 1973-4 and what Business Week magazine described on August 17, 1979 as “The Death of Equities”.
Another generation of investors have the date October 19, 1987 burned into their memories. That day saw the Dow Jones Industrial Average decline 22.6%; on just that one day. There was a bear market in 1990. But, for Millennials the first real shake up would be been the bursting of the Dot Com bubble. But, they would not have had any skins in the game and so it probably made little impression. The Great Financial Crisis of 2008 might have hit home in some way, either directly or indirectly.
What Millennials are investing in
Which brings us to 2020. Let’s look at what Millennials are investing in. Apex Clearing published a Millennial 100 report in December 2019. They analyzed some 734,000 portfolios owned by U.S.-based investors with an average age of just over 31 years. Here’s the list of the top 15 stocks:
The Apex Millennial 100 Q4 2019 (apexclearing.com)
What is noteworthy about the list is that it reflects big corporate American with a small nod to China. The companies all have substantial market caps. They are not wild speculations. Not surprisingly, tech companies seem to dominate.
Compare the S&P 500
But then, let’s compare the top weightings in the S&P 500 as of today’s date in December 2020:
- Apple Inc. (AAPL)
- Microsoft Corp. (MSFT)
- Amazon.com Inc. (AMZN)
- Facebook Inc. (FB)
- Alphabet Inc. Class A Shares (GOOGL)
- Alphabet Inc. Class C Shares (GOOG)
- Berkshire Hathaway Inc. (BRK.B)
- Johnson & Johnson (JNJ)
- JPMorgan Chase & Co. (JPM)
- Visa Inc. (V)
There is certainly an overlap. Tech are the top six. One stock seems to stand out. That is, $TSLA is in the first list but not the second. We can follow the story further. Let’s look at what Millennials are investing in today. We don’t have a comparable Apex Clearing list.
Robinhood investors
My assumption is that Robinhood is fairly representative of Millennial investors. We do have a list of the top 100 most popular stocks on Robinhood. I only list the top 10. There is some overlap with our earlier list. What is noteworthy is that $TSLA doesn’t even make the top 100. It seems Millennials have bailed out of $TSLA. I have no idea who today’s shareholders are in this company.
| Name | Symbol | Price | Today | Market Cap | Analyst Ratings Percentage of analysts that Agree this stock is a buy |
| Virgin Galactic Holdings | SPCE | $28.90 | 2.92% | 6.73B | 100% Buy |
| Catalyst Pharmaceuticals | CPRX | $3.59 | 1.10% | 372.10M | 100% Buy |
| Alibaba | BABA | $267.10 | 0.07% | 723.08B | 96% Buy |
| Amazon | AMZN | $3,159.20 | 0.86% | 1.59T | 94% Buy |
| Sony | SNE | $94.40 | 0.61% | 116.45B | 92% Buy |
| Aphria | APHA | $8.54 | 1.43% | 2.46B | 92% Buy |
| Alphabet Class A | GOOGL | $1,823.76 | 0.11% | 1.23T | 91% Buy |
| Microsoft | MSFT | $214.00 | 0.11% | 1.62T | 90% Buy |
| New Residential Investment | NRZ | $9.75 | 1.14% | 4.05B | 90% Buy |
Here’s the full Robinhood list.
What does it all mean?
What this suggests to me is that Robinhood investors and, I am guessing, Millennials in general, are investing in fairly sensible companies. For the most part the top ten have substantial market caps. We’ve all had the impression from the media over the last 12 months that Robinhood investors were rolling the dice on highly speculative stocks. This may not be the case. I would be the first to admit that these thoughts are hardly based on a scientific survey.
My takeaway is that Millennials are undoubtedly tech savvy and comfortable in a digital world of networks, platforms and intangible assets. They are simply human when it comes to investing. As Daniel Kahneman would say: “Human is simply a normal human being who is neither fully rational nor completely selfish.” So perhaps they are no more foolish than their parents when it comes to investing.
To read more deeply about the place where our battle for investment survival takes place, take a look at the Motherlode Part 1: The Field of Play.
To learn about the pros and cons of different areas of the economy to invest in see Chapter 33. Thoughts about the different sectors and groupings
Want to dig deeper into the principles behind successful investing?
Click here for the Motherlode – introduction.
If you like this blog, tell your friends about it
And don’t hesitate to provide comments