A new report has shown that the millennial generation will be an investment force to be reckoned with as they build their careers and inherit the baby boomer wealth.
The Legg Mason Global Investment Survey found that Millennials as investors are more optimistic and willing to embrace risk than their baby boomer parents.
Millennials investors are also more idealistic in their approach and embraced ESG assets and considered ethical factors in their returns judgement.
Seventy per cent of millennials would choose funds or companies in accordance to ESG factors while only 21 per cent of Baby Boomers made the same claim.
“More than anything, the research paints a picture of Millennials as conviction investors, backing their own judgment and values. Australian Millennials see the best opportunities in the year ahead coming from international stocks, real estate, cash and domestic stocks,” the report read.
Three-quarters of millennial investors think they have enough money for retirement compared to 62 per cent of Baby Boomers and are 0.9 percentage points more ambitious in terms of returns.
Legg Mason Australia and New Zealand’s managing director Andy Sowerby said the evidence made it clear that Millennial investors had a different world view.
“It is possible that a lack of experience is behind the optimistic viewpoint that the Millennials have, as they are too young to have been materially impacted by bear markets such as the GFC, tech wreck or Asian currency crisis.
“Their belief that they understand investment markets and have expertise has yet to be tested in a bear market or a recessionary period,” he said.
However, Mr Sowerby cautioned that Millennials may not generate sufficient income to be so confident.
“When we look at the asset allocation they are using as a model for their investment portfolios, Millennials are not embracing growth assets enough to justify their confidence for securing a comfortable retirement. Put bluntly, they need to save more and embrace higher-risk asset classes if they are to meet their longer-term investment goals.”
Mr Sowerby said Millennials were more likely to invest in higher-risk investments but said they needed to remember to think long term.
“The desire by Millennials to ‘time the market’ and invest in downturns versus Baby Boomers’ risk-averse attitudes is a sensible precaution. Baby Boomer investment horizons will inevitably be shorter, and de-risking investment strategies will make greater sense than for Millennials, who should be thinking long-term and focusing on growth assets.”
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