Millennials more confident investors but unrealistic about income and returns

According to the 2016 Schroders Global Investor Study, UK millennials (those aged 18-35 years) are engaged with their finances and more confident than the older generation when it comes to their investment knowledge.

A thirst for knowledge

The study, which surveyed 1,000 UK investors, showed that 68% of millennials believe they have a greater understanding of investments than the average investor. This is compared to 48% of those investors aged over 35. A desire to learn more was also highlighted with nearly all (92%) millennials saying they would like to improve their understanding of investments compared to 75% of the older group.

Inflated income expectations

Despite their investment knowledge and desire to learn more, young investors’ desire for income and long-term returns did appear to be significantly inflated. In the UK, the average level of desired income was 7.5% but, with many countries’ interest rates at or near historic lows, plenty of investors look set to be disappointed. Millennials demands were more unrealistic, with a minimum desired level of income from their investments of 10.2% per year, compared to older investors at 6.6%.

Short-term investing bias

The study also highlighted millennials’ bias towards short-term investing. On average, UK investors tend to hold their investments for just under five (4.7) years; however, the average millennial only looks to hold their investment for just over two and a half years (2.7 years).

In comparison, those investors aged 36 and over look to hold their investments for an average of 5.4 years.

However, when you look at the investment goals of millennials, they tie in with their bias towards short-term investing, as they are more likely to invest for more immediate financial requirements. Compared to older investors, millennials said they were more likely to invest for the following reasons:

  • To provide a deposit for buying their home (24% millennials vs 6% older)
  • To support a career change/pay towards professional qualification (21% millennials vs 6% older)
  • To help meet monthly mortgage/rental payments (21% millennials vs 6% older)
  • To buy something other than their home (21% millennials vs 15% older)
  • To provide an income for their children/other relatives (21% millennials vs 13% older)
  • To provide their only source of income (16% millennials vs 9% older)
  • To pay for healthcare/medical bills for themselves or a relative (17% millennials vs 7% older)

On the other hand, they were less likely to invest to supplement their pension (30% millennials vs 60% older) than older investors.

Seeking investment advice and guidance

When it comes to making an investment decision, over a third (36%) of millennials would look to consult with friends and family, slightly fewer than those who would consult with a financial adviser (44%). A similar proportion said they would do their own research using independent financial websites (44%), investment management websites (45%) or investment provider websites (47%).

James Rainbow, Head of UK Financial Institutions and Strategic Accounts at Schroders said:

“It is very encouraging that millennials are so engaged with their finances and that they are keen to learn more about investments.

“Given their investment goals, it’s not surprising that millennials have a shorter time horizon however it’s important not to sacrifice longer term goals, particularly retirement savings. Different goals, time horizons and attitude to risk will inevitably require a different investment mindset.”

Notes: About the Schroders Global Investor Study 2016

Schroders commissioned Research Plus Ltd to conduct an independent online study, between 30 March and 25 April 2016, of 20,000 investors in 28 countries around the world, including 1,000 in the UK. This research defines ‘investors’ as those who will be investing at least €10,000 (or the equivalent) in the next 12 months and who have made changes to their investments within the last five years. These individuals represent the views of investors in each country included in the study.

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