I have two millennial daughters, and when I was their age, I had just started to invest in stocks. Perhaps this is why I was particularly interested in what the Center For Audit Quality’s annual research uncovered with respect to millennial investors and their confidence in the U.S. markets.
For the last nine years, the Center for Audit Quality (CAQ) has conducted research known as their Main Street Investor Survey. The report looks at a unique aspect of the ‘main street investor,’ and the theme of the 2015 survey was the “Investor of the Future”—or as the survey defined them, millennials.
Overall, Millennials Mirrored The Broader Investor Group
The good news was that both millennials and the investor group as a whole had pretty high confidence in the U.S. financial markets and publically traded companies. Millennials also mirrored all investors in reasons for feeling confident about companies except in the category of “positive statements about the company”. Millennials were significantly more trusting of the public statements made about companies versus the investor group as a whole. I can only suspect that they haven’t had enough time on earth to grow as skeptical as the rest of us… but give them time.
A Clear Culprit is Eroding Trust in Investor Protection
Probably the most glaring and timely highlight of the survey was the following question:
There are a number of different players that have roles in helping to advance investor protection. How much confidence do you have that [INSERT] is/are effective in this role in looking out for investors?
High on the confidence list were independent outside auditors, financial advisors, stock exchanges, and independent audit committees. The sad news? The cellar-dweller by an extremely wide margin was (yep, you guessed it!) Congress. Congressional bickering and party politics (versus what is best for the country and its constituents) were the reasons cited for lack of confidence. I’ve included my Inside America’s Boardroom episode with Cindy Fornelli, the executive director of the center, which highlights the survey findings:
As for my millennial daughters, I see them being more conservative with their investments than the norm. I’m guessing that might be related to an educational exercise their mother and I dreamed up to teach them the value of good investing and how the capital markets work. The lesson didn’t quite go as planned, although it turned out to be very educational.
After giving them $500.00 during their middle school years and asking them to pick a couple stocks to analyze and invest in… they lost half their holdings value in just three short months. It was a wonderful lesson for someone who would be open to understand the cycles of stock markets—that technically you haven’t lost your money until you decide to sell. Although, my adolescents had a hard time focusing on why their money seemed to disappear without anything to show for it. As a point of interest, not all was lost on the exercise. They sold the losers and picked several winners with what value remained and those choices and the stock market continue to reward them today.
So will millennials have the confidence to invest in the capital markets like their boomer parents did? I think the answer is yes, and I believe they will have more patience. At least, I sure hope so.