Tag: investing trends

Millennials & The Art of Investing

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Throughout every sector, Millennials are driving changes. Now, Millennials are taking advantage of a variety of high-tech and social media tools that allow them to plow their wealth into investment vehicles of their choice. Given their love for anything tech-related, it should come as little surprise that Millennials are now leveraging social networking platforms, websites, and mobile apps to do everything from following stock-picking tips to finding financial planners. One thing is certain: When it comes to investing, Millennials are taking a completely different approach from that of their parents and grandparents.

How Millennials Invest Differently

No longer are stock tips being passed along on the golf course. When today’s generation of investors want to purchase shares, they do not reach for the telephone to ring up their broker. Today, all it takes are a few clicks on an app for Millennials to review a prospectus, get advice, and even make an investment. According to The Wall Street Journal, more than 30 percent of Millennials surveyed recently stated they are more loyal to brands that are up-to-date in regards to technology.

While Millennials can sometimes be wary about jumping into investment coming off the heels of the recession, the availability of social media tools is making it easier and more comfortable for this age group to learn about investing.

The Potential Drawbacks to Technology-Based Investments

If there is a drawback to the availability of social media for investing, it is the potential to develop unrealistic expectations for immediate results. As a whole, the Millennial generation are accustomed to fast results. Frequently dubbed as the instant gratification generation, Millennials check their phones as many as 43 times daily. In an age where services, products, and information are just a tap or a swipe away, it can be easy for Millennials to fall into the trap of expecting instant success when using social media and other high-tech tools to invest. An appetite for adventures combined with a preference for game-playing elements can make the situation even more risky.

As is to be expected of an adventure-seeking, forward-moving generation, Millennials tend to be more bullish about investments than previous generations. BlackRock also reports that Millennials are not only more confident about the future but also spend more time reviewing their investments than Baby Boomers. The report found that while Baby Boomers spend only an average of two hours reviewing their investments each month, Millennials dedicate up to seven hours per month studying their investments. Given the fact that Millennials were coming of age when their parents lost their savings as a result of the financial crisis, this is hardly surprising. With such experiences informing their teenage and young adult years, Millennials are committed to protecting their financial futures.

In an effort to make certain they do not experience the same problems, Millennials are approaching investing in an entirely different manner from Baby Boomers. While Boomers only put away an average of 11 percent for investing, Millennials put away 18 percent for investing.

Taking Control of Investing with Online Tools and Apps

Millennials have become accustomed to using technology for every aspect of their lives, so it only makes sense that digital technology has become a significant component in their investments, as well. E-Trade reports that people under the age of 35 are more likely to take advantage of online tools for monitoring their investments. With such tools, investors are able to take greater control, reviewing their portfolios anytime they desire rather than waiting for reports to arrive in the mail on a quarterly basis.

A report from Forbes found that more than $1 billion has been funneled into tech-related personal finance companies over the past few years. During the first quarter of 2014 alone, this sector received an investment of $261 million. There has been a particular emphasis on startups that target young investors by providing mobile-enabled, user-friendly features.

Part 2: The Age of “Stockal” Media Cometh!

This is the second part of a 2-part blog series on the imminent future of stock market investing and the way socially active investors and traders can make the most of it. Thanks for all the feedback you sent on the first part.

Quick re-cap:

Def: Stockal Media = (Stock Market + Social) Media

We define “Social”, here, as a combination of popular platforms like Twitter, StockTwits, eToro, Facebook, discussion forums like SeekingAlpha, commenting platforms like Disqus and LiveFyre, and blogging platforms like Tumblr, WordPress and Blogger. Over the past 2 years it’s has been proven, with a fair degree of certainty, that things (news, opinions etc.) reported on social media impact stock prices. The crucial thing here, as a trader, is to be able to spot whenever such information emerges.

To continue …

Economic Trends: When key economic signals point to a healthy and growing economy, unemployment is low, inflation and interest rates are under control, people have more money, they buy more and companies are likely to make more money. Future of companies looks bright and they are looking to scale-up. Conversely, negative signals indicate a contracting economy, joblessness and therefore less money for companies. Stock market moves almost always in conjunction with the predicted movement of the economy.

While some these key economic signals, indicators – if you may, are easy to track from federal government sources and organized media. These are the likes of CPI (Consumer Price Index), Gross Domestic Product (GDP), Budget Surplus, Inflation, Central Bank Interest Rate Federal Tax rates and Unemployment Rate.

But since everyone has access to such data, there is no big market advantage that a trader can easily derive. It is interesting, though, when you are able to track some of the signals or conversations which “could” predict any or all of these indicators. For this, it’s important to know who the opinion makers are. These could be individuals or small think tanks or consulting organizations. These could also be a combination of conversations on a discussion forum or thread. A trader or analyst could do well to follow these sources of information and analysis across social media. One can also do a larger “mood of the crowd” analysis to determine if the overall sentiments are positive or negative. For instance, if a lot of people are happily talking about new purchases and new jobs then it’s likely that the economy is looking good as well. If loan departments of banks are doing well and their future outlook remains positive (info you can get by following their key people, customer outreach handles and digital advertising) then people are taking more loans – and are therefore confident of paying the same back, indicating good jobs prospects and continued employment. A lot of this data and analysis can be gleaned from networks like Facebook, Twitter and Linkedin.

Geo-political Events (National & International): Quite often, it has been seen that news related to international events has an impact on stock markets in general and quite often, this impact spreads across multiple markets in multiple geographies. For instance, when a Malaysian Airlines flight was struck down on the Russia-Ukraine border, it created a mood of global political instability that lead to a minor slowdown in growth of stock markets and in turn, lead to increased investments in Gold (because of the inherent stability associated with Gold as a commodity). Similarly, if a US-based company is largely dependent on exports to, say, the Asian market and there is unrest in a major Asian economy, the company’s stock performance is likely to be negatively impacted.

Such information can be discovered quite easily on organized media. But it may be too late, by then for a trader to take an advantageous position. One can follow specific keywords on social media and lesser known websites (through search engines) to discover useful nuggets of such information. For instance, if a major illness strikes, it is quite likely that you’ll read about it on Twitter before reading about it on New York Times.

Company Related Events: A key employee being hired – say a new CEO or Sales Head. Brand receiving glowing feedback or awards. A massive layoff. An overall organizational restructuring. A new product launch or new market entry. An acquisition or new partnership. These are just some events that have a high likelihood of impacting stock prices.

Events like these and more can be discovered on social media by following key employee handles, platforms like Linkedin and Glassdoor, Twitter handles or analysts and bloggers and credible blogs written by employees as well as outsiders who are enthusiastic followers of and commentators on the industry the company belongs to.