A New Generation of Investors is Doing Things Completely Differently — and That’s Good News
If you’re still paying a lot of money to a financial advisor, who helps you choose where to invest your money, chances are you’re over the age of forty. That’s right; millennial investors have decided to change the way things are done. No more paying 20% off of profits as a commission (in addition to a monthly fee), the youngsters are doing it independently.
Sure, it’s much easier these days than it was back then to gain knowledge with the internet and mainly thanks to AI. However, it’s also primarily a factor of millennials being braver and bolder, with their perception that they don’t need help. If you look at the recent GameStop short squeeze events, you’ll see that they are not willing to play by the old rules anymore. While there are risks to it, I still believe these winds of change are certainly a breeze of good news.
Don’t bank on it
I am fully aware that millennials, with their characteristic impatience and ‘know-it-all’ attitude, tend to make decisions that are sometimes too rash — especially when it comes to the stock markets. On the other hand, don’t forget that the other viable investment options, such as deposit accounts offered by banks, haven’t been a source of great profit for over a decade now, and that’s an understatement.
With interest rates being close to zero and with a sense of mistrust in the banking and financial sector, it’s no wonder banks are not considered a good place for your money anymore. You may be surprised to learn that in some countries, keeping your money in the bank might even lead to losses, let alone very marginal profits.
With that in mind, it’s no surprise that younger investors are always searching for new venues. You must remember that their financial future is much less secure than their parents’ financial future was, making them more willing to take risks. While money in the bank will not yield much profit, it will certainly not cause substantial losses. Investors are aware of that and still choosing to be adventurous. The question remains: Do they have a choice?
Sharing is caring
This is where a new type of investing comes into play, taking advantage of the potential power of person-to-person connections as opposed to succumbing to the institutional rules. It’s like taking the shared economy principles that we all know from Lyft and Upwork and implementing them into the way we handle our money. I see this as an excellent opportunity for angel investors to be the driving force behind a new kind of economy. Want some examples? Here goes:
● Fintech — technology has not only improved the way we do business, but it has also enhanced our power to do it. For example, instead of investing through the bank, under its terms, people can now use the internet to pass the middleman or even to group up and form a stronger investing body.
● Peer-to-peer loans: The same principle is at the base here. You can get a loan from a financial institution, but you know the terms will not be in your favor. Loans from private companies are usually even worse. However, the ability to find a person out there with a bit of extra cash, willing to lend it under reasonable terms, definitely facilitates this industry.
● Crowdfunding: Some sectors, like real estate, where small investors can’t just get a foothold. Or can they? A crowd of funders, bonded with an agreement, can give investors power, even if they allocate small amounts.
● Startups: While this is riskier, catching a startup before it explodes is very complicated. It is still considered a means with more potential than an average savings account nowadays.
