The lifestyle of a millennial is very different to that of previous generations. Most millennials can’t afford to invest in the property market let alone afford to buy their own home. They are considerably more unstable and will change jobs, homes and even countries more frequently than their predecessors.
Their attitude to money is slightly alarming with about half of them identifying as spenders and the other half as savers. However, in order for millennials to survive their retirement, they need to join the percentage of them that have become investors; solely keeping their money in a savings account will not be even near enough over the next few decades.
Most savings accounts today have an interest rate near the zero-mark so it is crucial for them to start learning from their elders while they have time on their side and start the shift from saving to investing.
To balance this out, millennials could look into building a more diverse investment portfolio. By including allocation in stocks and in different types of bonds they can diversify their portfolio, giving them an additional steady approach which is low risk, low reward over a long period of time. Investing in bonds can provide a great source of long-term funds which can prove to be vital for millennials in the coming decades.
It is not only millennials who could benefit from being more open minded. A recent study conducted by Bitwise concluded that adding cryptocurrency to a traditional investment portfolio could be equally beneficial. The study showed that a 5% allocation of Bitcoin in a traditional portfolio mix of 60% stock and 40% bonds doubled the returns of the portfolio over four years, whilst showing a minor impact in total volatility.
Millennials and crypto
Even though only a small percentage of millennials identify as investors, they are currently the largest group of supporters of cryptocurrency. Data has showed that 43% of millennial online traders trust the crypto market more than the traditional stock market. This might not come as a surprise as the earliest millennial traders would have entered the market witnessing the last financial crash.
As much as the Millennials who started early are seen as the biggest players in crypto and have done really well, they could be limiting themselves to this market by drawing solely on the financial industry that they have witnessed instead of looking at investment history and the broader picture.
Even with all the risks associated with investing in cryptocurrencies, millennials are taking their chances and are more likely to invest in this market than any other. However, investing in cryptocurrency assets does not come without risk. So far it has looked promising in the investment market but there will always be an element of potential failure.
Millennials investing in this market will have to ensure they have diversified their portfolios with other types of investments to protect themselves from drawbacks.
The conclusion we can draw is that incorporating both approaches in the way you invest will assist you in reaping the most benefits. It makes sense for most investors to enter the bond market and have it growing in the sideline even if you prefer the newer markets such as crypto.
This article is for information and educational purposes only and does not form a recommendation to invest or otherwise. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.