Global Investor Study
Are millennial investors facing a perfect storm?
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:
- Millennials demand more income (10.2%) than other investors (8.4%)
- Millennials have an extremely short-term investment outlook, with 63% holding investments for less than 2 years
- Millennials are risk averse, prioritising capital preservation and a return higher than inflation when choosing an investment
- Millennials’ income is being stretched across a wide spectrum of dependencies from supplementing salary and pension to supporting children and buying houses
Is a financial storm brewing?
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:
- Their investments will grow faster than is realistic
- The pot they ultimately do build will pay a far higher income than is likely
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.
Stretching incomes to the limit
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:
- To supplement salary (46%)
- To grow a portfolio (41%)
- To supplement pension (35%)
- To provide income for children/relatives (30%)
- To buy something other than a home (28%)
- To pay for a deposit for a home (26%)
- To pay education fees (26%)
- 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.
For the full story and interactive infographic visit www.schroders.com/gis or download the full report below.
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. ↩
Read the full report
Schroders Global Investor Study 2016 - investment outcomes 8 pages | 156 kbDOWNLOAD
Important information: The views and opinions contained herein are those of the named author(s) on this page, and may not necessarily represent views expressed or reflected in other Schroders communications, strategies or funds. This document is intended to be for information purposes only and it is not intended as promotional material in any respect. The material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The material is not intended to provide, and should not be relied on for, accounting, legal or tax advice, or investment recommendations. Information herein is believed to be reliable but Schroder Investment Management Ltd (Schroders) does not warrant its completeness or accuracy. The data has been sourced by Schroders and should be independently verified before further publication or use. No responsibility can be accepted for error of fact or opinion. This does not exclude or restrict any duty or liability that Schroders has to its customers under the Financial Services and Markets Act 2000 (as amended from time to time) or any other regulatory system. Reliance should not be placed on the views and information in the document when taking individual investment and/or strategic decisions. Past Performance is not a guide to future performance. The value of investments and the income from them may go down as well as up and investors may not get back the amounts originally invested. Exchange rate changes may cause the value of any overseas investments to rise or fall. Any sectors, securities, regions or countries shown above are for illustrative purposes only and are not to be considered a recommendation to buy or sell. The forecasts included should not be relied upon, are not guaranteed and are provided only as at the date of issue. Our forecasts are based on our own assumptions which may change. Forecasts and assumptions may be affected by external economic or other factors. Issued by Schroder Unit Trusts Limited, 31 Gresham Street, London, EC2V 7QA. Registered Number 4191730 England. Authorised and regulated by the Financial Conduct Authority.