Tuesday September 8, 2020 - 11:40:59 GMT
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Long term investing is not popular with the new generations
Millennials and Generation Z-ers are already the driving force of the global economy. Generation Z-ers, the youngest group of people are expected to become the biggest spenders, with the estimated purchasing power of $143 billion in the United States alone. They are the primary users of means of technology that are shaping the industries and boosting economies in the 21st century. Their demand for modern technology is particularly high when it comes to provision of financial services such as banking.
Hoping for a better future and taking care of it from an early age is a crucial part of the ‘American lifestyle’. Savings, investments and major purchases are carefully observed by families across the United States. It is estimated that the average American household has a savings account of roughly $8,863. Couples with children save up even more, with their national average savings exceeding $10,000. Moreover, single parents have the least amount saved.
The United States is rather different from European nations, especially when it comes to how the welfare system functions and social benefits. Country’s essential industries, including transportation, education and healthcare, are largely privatized, soaring the prices of almost all services. As a result, the United States is also known for families with outstanding college funds, often saved in private stocks as well as retirement funds usually managed by major companies.
More and more people, particularly youngsters use modern ways of investing their savings. Thanks to technological advancement, performing financial operations on the internet is possible in the blink of an eye. Exchanging currencies and netting profit are popular among young people. Many find trading Forex without deposit a great opportunity to gain the first large sum of money. Digitalization has also brought financial instruments, like cryptocurrencies to us.
Moreover, the citizens of the United States make some of the biggest contributions to global markets in the world. They have always invested in stocks rather actively, seeing them as a means of secure profit. This mainly is due to the fact that the country is home to the world’s largest markets, with many globally acknowledged listings, such as the S&P 500.
This is the way Americans have been living for a long time, but the new generations are changing it in the United States and beyond. All of the aforementioned activities are a means of investment. More specifically, those are long-term investments. The broad definition of a long term investment is that it should last for at least a year. However, the truth is that the majority of those investing in stocks or real estate do not see the profit for a much longer period. However, in an attempt to ensure a financially independent future, many people still decide to take this long road.
A Bankrate survey asked Americans in what would they invest the money that is not urgently needed to cover other necessities. Overall, the general public chose real estate as the most desired means of long term investment in the United States with 31% of people responding so. However, the interesting trend is rather visible when looking at the responses of Millenials to the same question. A comparably bigger portion, 36% of those belonging to that generation stated that they would invest in real estate. The second most popular choice for this age group was cash investments, for instance, savings accounts or CDs. Long-term investments in cash coming first on the list is also a new trend since it has left the investments in stock markets on the 3rd place. Funding in gold and other precious metals, as well as bonds, share the last 2 spots with very few choosing them.
In general, the trend is that younger generations do not invest in abstract, non-tangible assets. As a result, the interest in long-term investments by Millennials and Generation Z-ers is much lower. The particularly concerning is the decline of youngsters that want to invest in stock markets. This has been the true driving force for many generations of Americans and is suddenly being betrayed by the youngest of the 21st century. They choose homeownership over faster returns. The personal financial coach Ramit Sethi told CNBC “Generally, we can assume that over the long term if we invest in a low-cost diversified index fund, we get about 7% annualized returns. Can you beat that in your area, over time, with real estate appreciation?”
The answer is that real estate investment returns can not exceed those of stock markets. Owning a home is not an easy task to manage, especially in the United States. There is the real estate tax, maintenance and other factors that influence the overall return. As a result, for a much higher investment than in stocks, one will likely receive a smaller profit.
However, with the young generations, it is not only about profiting the most. They care about stability and security. They trust investments that are tangible and visible. Many say that Millennials and Generation Z-ers prefer investing in more concrete assets, such as real estate. The 2007-2008 financial crisis had a major impact on what youngsters think about stock markets. Wall Street, City of London and Tokyo collapsed more than a decade ago but some of the consequences are still easy to feel. The perception of stock markets among the younger generations is one of the most profound effects the crisis has had. The lack of trust in the system is reducing investments by the biggest spenders.
Moreover, besides the expectations and fears of another financial catastrophe, many are concerned about the current state of global markets. The growth is slow and a whole variety of external events are affecting them every year. Amid the general turmoil globally, it should not be a surprise that the youth is being extremely cautious when it comes to investing their money.
Analyzing every aspect of the young generation’s investing behavior is difficult. They have just started revealing their thoughts about the market and the way they intend to secure a fortunate future. However, for whatever purpose they refuse to make long-term investments, it is clear that homeownership and tangible assets are the most popular among the youth.
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