Financial Advisors

How the next generation of investors views the stock market

Generation X an Y investors are devising strategies on their own.

Generation X an Y investors are devising strategies on their own.

When thinking about individuals who are concerned about investing and wealth management, Baby Boomers often come to mind. This is a logical assumption, as folks in this age group are nearing or have already begun retirement. There are, however, two other generations that make up a large percentage of those actively trading in the stock market. As members of Generations X and Y become more prominent, financial advisors and other professionals who develop trading strategies will need to reevaluate how they attract and work with these individuals. 

"Everyone sees the world through his or her own generational filter," Cam Marston, founder of consulting firm Generational Insights, told advisors at the Fidelity Inside Track conference, as reported by On Wall Street. "One of the main factors that distinguishes investors – and may be separating you from connecting well with them – is generation or age group. Age and life stage also dictate many needs and preferences."

Marston also noted that younger investors, especially those from Generation Y, have a much more skeptical view of the stock market compared to  their Boomer parents. Also known as Millennials, this group of young people witnessed the decimation of their parents' retirement portfolios in the 2008-2009 stock market crash and are wary of making similar decisions. Older Americans, on the other hand, continue to have confidence in the basic principles of the market and are more willing to ride out a storm.

Despite this negative attitude, research from Fidelity found that members of Generation X and Y are actively engaged in strategies to grow their wealth. The financial services company's 2013 Millionaire Outlook suggests affluent individuals in these generations are investing in a wide range of asset classes and developing their own ideas for portfolio management.  

Similar to their parents, young investors are likely to meet with a financial advisor or wealth manager, but their reasons differ greatly. Boomers tend to meet with financial professionals because they are truly seeking the advice of an expert. Millennials and Generation Xers, however, are more or less looking for affirmation, according to the study. They often go to advisors or managers after they've already made a decision, just to confirm that they made the right choice. 

The study also found that X/Y millionaires drift toward more aggressive investment strategies, as evidenced by their average of 30 trades per month. They spend much more time researching individual stocks than their parents and grandparents, and see themselves as knowledgeable about the financial services industry. 

At any age, investing in the stock market is inherently risky. Actively managing your assets and using SmartStops' portfolio risk alerts will keep you apprised of trends and help you make informed financial decisions. 

Categories: Financial Advisors

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