Depressed wages, escalating living costs and a struggling global economy – millennials have a lot on their plates. They need investment income to support short and long-term financial aspirations. Does something have to give and is the perfect investment storm brewing?
Depressed wages, escalating living costs and a struggling global economy – millennials have a lot on their plates. They need investment income to support short and long-term financial aspirations. Does something have to give and is the perfect investment storm brewing?
The Schroders Global Investor Study 2016 found that millennial investors (those aged 18-35) have unrealistically high income expectations, a worryingly short-term investment outlook, and many dependencies to support both now and in the future.The result could see millennials fall drastically short of their investment goals.
Schroders Global Investor Study revealed:
It is a potentially toxic mix. We live in a world where most developed nations’ interest rates are at or below 0.5%, and, in some cases, heading lower. The average stockmarket yield is just 3.8%[1].
To get the higher income they demand millennials would either need to take more risk or hold investments for a longer period in order to ride out market cycles, neither of which they seem willing to do.
The major risk is that millennials are labouring under two misapprehensions:
Compounded over a 20 or 30-year time frame, the gap is potentially huge, making the mismatches between expectation and reality identified by the Schroders Global Investor Study 2016 a cause for real concern.
To make matters worse, millennials have a far greater number of dependencies than older generations over which their income is being stretched.
Schroders Global Investor Study found the main reasons millennials invested were:
1. To supplement salary (46%)
2. To grow a portfolio (41%)
3. To supplement pension (35%)
4. To provide income for children/relatives (30%)
5. To buy something other than a home (28%)
6. To pay for a deposit for a home (26%)
7. To pay education fees (26%)
8. To pay for healthcare (22%)
Yet, according to a recent Guardian newspaper study, ‘a combination of debt, joblessness, globalisation, demographics and rising house prices is depressing (millennials) incomes.’[2]
The chasm that has opened up between millennials’ investment goals, their unrealistic income expectations and short-termism needs to be addressed, otherwise we could be heading for another social and economic crisis. τ
Source:
[1] Source: FTSE, S&P 500, CAC, DAX, Shanghai, Nikkei, ASX, Hang Seng, Bovespa, Mexbol. Average forward 12-month yield across 11 indexes as at 18 May, 2016, according to Bloomberg data.
[2] http://www.theguardian.com/world/2016/mar/07/revealed-30-year-economic-betrayal-dragging-down-generation-y-income
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