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Tuesday, November 5, 2024

Brookfield Asset Management Shareholders, 3rd Quarter, 2024

Brookfield Asset Management Shareholders, 3rd Quarter, 2024

Overview

We generated record results in the third quarter. Fee-bearing capital grew to $539 billion, an increase of nearly $100 billion or 23% year-over-year, which benefitted from $135 billion of inflows over the last 12 months, growth in our public affiliates, and the acquisition of partnership stakes in leading partner managers.

Growth is being generated in all our business groups, with tailwinds provided by our global leadership position in energy transition, AI infrastructure and credit. We invested early into sectors which, today, are very much in favor – renewable power, nuclear energy, data centers and semiconductor manufacturing, all of which are experiencing multi-decade investment growth cycles.

On the back of this growth, we generated a record $644 million of fee-related earnings (FRE) and a record $619 million of distributable earnings (DE) in the quarter, increases of 14% and 9%, respectively, over the prior year quarter. The operating leverage inherent in our business has enabled us to expand margins to 58% in the third quarter, a greater than 200-basis point increase from the second quarter. Over the coming quarters, we expect to see further earnings growth over the coming quarters given the success we are having with our fundraising efforts for our flagship and complementary strategies.

Growing Market Tailwinds Enabling Monetization of High-Quality Assets

While global economies and capital markets were more volatile over the past few years, our franchise excelled, with both strong deployment and fundraising. Market conditions are increasingly more constructive. Inflation has eased in most regions, central banks have begun to lower rates, and liquidity is returning to the markets. Since late 2023, the cost of borrowing has declined over 150 to 200 basis points, creating greater confidence among market participants and increasing transaction activity.

We are seeing greater monetization activity, leading to more capital returning to clients and providing for a more constructive fundraising environment across the industry. Given the high quality of our underlying portfolio, we have benefitted disproportionately from this trend and expect it to continue.

Within our portfolio, we have started to see this impact, demonstrated by more than $17 billion of asset sales that we have signed or closed in recent months. With a strong pipeline of further asset sales, we expect this activity to continue. Some notable announcements include:

  • In Real Estate, new supply is low across most sectors, financing markets have been steadily improving throughout the year, and underlying fundamentals remain strong, creating an attractive market for high- quality assets. We sold a total of $5.4 billion of real estate assets in the past few months. These include our UK Retail Parks Portfolio, a US Manufactured Home portfolio and the Conrad hotel in Seoul, Korea, which generated blended annualized returns of 28% and a multiple of capital of 2.5x.
  • In Renewable Power, there is significant demand for stabilized, cash-generative businesses, particularly those that have a growth angle. We announced a total of $3.2 billion of asset sales in our renewable power and transition portfolio in recent months. The largest of these sales include Saeta Yield, a leading independent developer, owner and operator of renewable power assets in Spain and Portugal; our stake in First Hydro, a critical electricity generation and storage facility in the United Kingdom; and a 50% stake in our Shepherds Flat onshore wind portfolio in Oregon, which generated blended annualized returns of 27% and multiple of capital of 2.5x.
  • In Infrastructure, demand is growing for stabilized, income yielding assets. We have announced a total of $2.6 billion of infrastructure asset sales in recent months. This includes separate agreements to sell two Mexican regulated natural gas transmission pipelines, which generated an annualized return of 22% and a multiple of capital of 2.2x.

Broader market stability should enhance our path forward by supporting ongoing growth and value creation across our business, while lower interest rates are supporting a recovery in yield-focused public stocks, including our Infrastructure and Renewable Power publicly listed affiliates. The management agreement with our affiliates is linked to their share prices, aligning our interests with their shareholders. As yield stocks continue to regain public favor, and with strong underlying business performance, our earnings should increasingly benefit from this tailwind.

Business Group Updates

We saw strong growth across all our platforms, especially within Credit, which accounted for more than half of the $21 billion raised in the quarter. We continue to see strong demand from clients increasing their capital allocations to credit strategies, particularly from the insurance sector.

In addition to successfully monetizing numerous mature assets, we have been actively deploying capital, with $20 billion invested or committed during the quarter. We also expect the coming year to be a good period for capital investment.

Highlights of our fundraising and deployment activity during the third quarter include:

Renewable Power & Transition

  • Fundraising: We raised $2.2 billion of capital within the quarter, including:
    • An initial close of our Catalytic Transition Fund for $2.4 billion, of which $1.4 billion was raised in the quarter. This new capital is in addition to the $1 billion anchor investment from ALTÉRRA announced previously at COP28.
  • Deployment: Subsequent to the end of the quarter, we announced a new partnership agreement with Ørsted to acquire a $2.3 billion stake in a premium portfolio of 3.5 GW of contracted operating offshore wind assets in the United Kingdom with a strong operating history.

Infrastructure

  • Fundraising: We raised $1.4 billion of capital within the quarter.
    • With lower interest rates and clients returning to cash yielding investments, we raised over $500 million within our open-ended supercore infrastructure strategy, surpassing the capital raised for this strategy last quarter and making it our strongest quarter for fundraising in this strategy in over two years. We also raised nearly $800 million for our private wealth infrastructure fund.
  • Deployment: We completed the acquisition of a portfolio of 76,000 telecom sites in India from American Tower Corp for $800 million of equity capital ($2.2 billion of enterprise value) in the fourth vintage of our flagship infrastructure fund.

Private Equity

  • Fundraising: We raised $2.0 billion in the quarter, and last week announced two strategic commitments for our Middle East Partners fund.
  • Deployment: We completed the acquisition of Network International for $2.0 billion of equity capital through the sixth vintage of our flagship fund and our middle east fund. Post-acquisition, we intend to combine Network with Magnati, our UAE payment processing business, to create a leading payments platform in the Middle East that will benefit from secular tailwinds and significantly expand our presence in the region.

Real Estate

  • Fundraising: We raised $1.6 billion of capital within the quarter.
  • Deployment: We deployed $1.5 billion, including:
    • Over $500 million into numerous logistics portfolios across North America and Europe in our opportunistic flagship strategy.
    • Subsequent to the end of the quarter, we made an offer to acquire Tritax EuroBox, a publicly traded European logistics REIT, for approximately $730 million.

Credit

  • Fundraising: We raised approximately $14 billion of capital within the quarter, including:
    • $6.4 billion across Oaktree funds and strategies, including $1.5 billion in the twelfth vintage of our flagship opportunistic credit fund.
    • $1 billion raised across our partner managers – Castlelake, Primary Wave, and LCM.
    • Inflows of $4.5 billion of capital from Brookfield Wealth Solutions, driven largely by institutional and retail annuity sales. We also raised $1 billion of third-party SMA capital from a large U.S. life insurance company. We are targeting $50 billion for similar SMAs over the next five years.

Increased Liquidity and Expanded Capabilities with New Partner Managers

Our balance sheet is very strong. We have significant cash on hand, zero debt, and are fully undrawn on our newly established $750 million corporate revolver.

Our balance sheet is used for seeding new strategies that meet the objectives of our clients to drive management fee growth and investing in partner managers that are complementary to our existing business and can strategically expand our product offering.

We partner with managers that are leaders in their space and that can help accelerate our origination capabilities and broaden our investment strategies. Further, we look for partner managers that can benefit from our collaboration and can accelerate their growth as part of our Brookfield Ecosystem.

During the quarter, we closed on a few strategic transactions, including:

  • Castlelake: Castlelake is a market-leading, $24 billion AUM alternative asset manager specializing in asset-based private credit including aviation and specialty finance. We acquired a 51% non-controlling stake in the manager and its fee-related earnings as well as a small stake in its carried interest and principal investments. Additionally, Brookfield plans to allocate over $1 billion of capital under management to Castlelake strategies, enabling them to scale their funds and expand their strategies.
  • SVB Capital: We completed our acquisition of SVB Capital through Pinegrove Venture Partners, our venture investment platform formed with Sequoia Heritage, which now manages approximately $10 billion in assets. SVB Capital’s 25-year track record in funds, private credit, and co-investments, alongside Pinegrove's existing expertise in venture secondaries and liquidity solutions creates a cohesive and dynamic venture platform that provides access to the innovation economy, designed to deliver tailored solutions for fund managers, founders, and limited partners in the venture capital ecosystem.

At our proportionate share, these two transactions have added approximately $7 billion of fee-bearing capital to our business and will contribute approximately $40 million of fee-related earnings on an annual basis. We are assisting both firms in accelerating their growth trajectories through our client relationships and access to scale capital.

Investor Day Summary

We hosted our Investor Day in September in New York. For those who were unable to attend, the webcast and presentation materials are available on our website.

In summary, our heritage as an owner-operator and 25-year track record of being a best-in-class alternative asset manager has enabled us to reach $1 trillion of AUM. Significant long-term macro tailwinds continue to drive the industry, with global alternative assets under management expected to more than double to $60 trillion in less than 10 years. We are positioned to capture this growth, which should allow us to double the size of our business over the next five years. Some of the topics we covered can be summarized as follows:

Expanding Client Capabilities to Meet Growing Demand Drivers

As the alternatives industry continues to grow, clients are increasingly demanding more from their managers— including global capabilities across a broad set of asset classes at scale, with products across the risk spectrum, and the opportunity for partnerships, SMAs and co-investments. We are using our scale to deepen our relationships with the largest institutional investors, while expanding our footprint into middle-market and family offices. As our strategic relationship with Brookfield Wealth Solutions continues to grow, we are developing more capabilities that we can draw upon to serve third-party insurance companies as well. Additionally, as we broaden our private wealth platform by targeting new investor segments and developing new products specific to our client base, this should drive further growth.

Brookfield Credit Will be our Fastest Growing Business

Earlier this year, we announced the formation of Brookfield Credit, which combined all of our credit capabilities across all our business and partner managers under one group. Today, our credit business represents nearly $245 billion of fee-bearing capital, with plans to grow to nearly $600 billion over the next five years. This growth will come through multiple avenues, which include expanding our flagship and complementary fund offerings and further building out solutions to meet the growing needs of our clients.

Growth Plans to Double the Size of our Business Over the Next Five Years

Our plan is to grow fee-bearing capital to more than $1 trillion over the next five years, doubling the size of our business. This generates 15%+ annual growth in earnings and dividends from continuing to scale our flagship funds, expanding our complementary strategies, and further building out our Credit Group. Growth in our capital base and expansion of our margins should accelerate our earnings, with expected fee-related earnings growing to $5.0 billion. Our earnings should become increasingly stable, with our long-term and permanent or perpetual capital base expected to represent over 90% of our total capital in five years’ time.

Further upside to our stable earnings base is our carried interest potential – this is our second leg of growth. While BAM can expect to realize approximately $2 billion of gross carry by 2029, this base has the potential to grow to $7 billion by 2034, proving to be a significant catalyst for distributable earnings growth in the years to come.

Enhancing Our Corporate Structure and Positioning Ourselves for Broader Index Inclusion

We continue to broaden our shareholder base and our access to the deepest pools of capital for our BAM shares.

Our public listing in December 2022 established us as one of the pre-eminent, pure-play, publicly-listed asset managers. Since then, we have received positive feedback from investors, with a significant increase in our U.S. investor base.

Our business fundamentals—including our stable, predictable earnings, an asset-light balance sheet, and strong growth prospects—make us an attractive investment. While we are pleased with our progress, there is still more we can do. One common theme we have heard has been the importance of broader index inclusion.

To that end, we are taking a few actions with the goal of positioning ourselves for broader index inclusion, and eventually to be eligible for the most followed, large cap U.S. indices.

The steps we are pursuing are as follows:

  1. Changed Our Head Office to New York

    We have been operating as a U.S. company for twenty years. Our largest share of revenues, assets under management, and employees are based in the U.S., as well as the majority of our institutional shareholders are U.S. investors and the majority of our shares are traded on the New York Stock Exchange. This quarter, we changed our head office to New York—already our largest office—and starting with our 2024 annual report, our financial reports filed with the SEC will be identical in form to those filed by other U.S. domestic issuers.

  2. Simplifying Our Corporate Structure

    The second step involves simplifying our corporate structure. As a reminder, we originally spun off our asset management business as a privately held company with two shareholders: Brookfield Corporation, which privately holds 73%, and publicly traded Brookfield Asset Management Ltd (NYSE/TSX: BAM), which currently owns the remaining 27% (these are the shares you own).

    Brookfield Corporation will now exchange its private interest in our asset management business for public shares of BAM, on a one-for-one basis. This will significantly simplify our structure – publicly-traded BAM will then own 100% of the asset management business, allowing the market cap to accurately reflect the total market value of our asset management business, something closer to approximately $85 billion today.

    Though this second step will not have an impact on shareholders or operations, it will require shareholder approval because we will be issuing approximately 1.2 billion shares of BAM to Brookfield Corporation in exchange for an equivalent number of privately owned shares of our asset management business, representing their 73% interest. As such, you will be receiving proxy materials over the next few weeks, and we will be holding a special meeting of shareholders to vote on this matter on December 20, 2024. We expect to close the transaction early in 2025, subject to regulatory and other customary approvals.

We are excited about both these initiatives, which we believe will deliver great value to our shareholders. Simplifying the corporate structure of the asset management business should make it easier for investors to understand and accurately value our security. In addition, broader index inclusion should drive increased ownership among passive institutional investors and attract a broader base of active investors who benchmark against these indices. This increased recognition in the market should ultimately lead to a broader shareholder base.

These efforts are aimed at ensuring our company can reach the broadest set of potential investors while having no impact to our operations, strategic plans or the tax profile of our dividends.

Closing

We remain committed to being a world-class asset manager by investing our capital in high-quality assets that earn solid returns, while emphasizing downside protection. The primary objective of the company continues to be to generate increasing cash flows on a per-share basis, and to distribute that cash to you by dividend or share repurchases.

Thank you for your interest in Brookfield, and please do not hesitate to contact any of us should you have suggestions, questions, comments, or ideas you wish to share.

Sincerely,

Bruce Flatt
Chief Executive Officer

Connor Teskey
President

November 4, 2024

 

Tuesday, October 29, 2024

Jordan Zinberg’s Top Picks for October 25, 2024

Jordan Zinberg’s Top Picks for October 25, 2024

Jordan Zinberg, president and CEO, Bedford Park Capital

Thursday, October 24, 2024

15 Fascinating Millennial Investing Trends

15 Fascinating Millennial Investing Trends

Millennials get a bad rap about being lazy and entitled, but they’re the largest generation currently in the U.S. labor force and tend to have a practical approach to finances. As these investors start to turn 40, we look at some key millennial investing.


Updated May 28, 2024
 Fact checked

We receive compensation from the products and services mentioned in this story, but the opinions are the author's own. Compensation may impact where offers appear. We have not included all available products or offers. Learn more about how we make money and our editorial policies.

Millennials, or those born between 1981 and 1996, as defined by the Pew Research Center, have had a lot happen in a short amount of time. Millennials have faced a lot of uncertainty in the economy, which shows up in their investing trends.

While many millennials feel like they’re behind on their financial goals and retirement savings, they’re also expected to inherit more than $40 trillion from their parents and other family members in the coming decades.

Given the immense amount of money they will control shortly, millennial investment trends and habits can provide helpful insight into the future financial landscape. As the oldest millennials turn 40 years old, let’s look at some of the investment trends that have shaped the millennial generation and some of the places they still feel stuck.

Key takeaways

  • Millennials are less likely to invest in stocks than Generation X.
  • Millennials are highly interested in socially responsible investing, contributing $51.1 billion to sustainable funds.
  • 24% of millennials have $100,000 or more in savings.
  • 46% of millennials say they aren’t saving enough, and it's the primary activity they need to do more of.
  • Only 37% of millennials feel knowledgeable about their investments.

One in four millennials has more than $100,000 saved

American millennial investors are saving more than ever before, increasing their savings by 10% in the last two years. Although 24% of millennials have $100,000 in savings, up from 16% in 2018, 27% said they are still not saving at all.

More than 75% of millennials are saving for retirement, and 32% are saving for their first home or looking to upgrade to a different house. Millennials are also the youngest generation to start saving, starting around age 24, compared to age 30 for Generation X and age 33 for baby boomers.

Source: Bank of America

Millennials are interested in sustainable investing

Over 60% of millennial investors believe impact investing has more potential to make lasting change than traditional charitable giving, according to Fidelity Charitable.

According to a study done by The Harris Poll, 76% of older millennials think climate change is a severe threat to society, and they’re willing to put their investment dollars into finding a sustainable solution. While other generations also care about climate and sustainability, millennials hit their prime investing years with more access to investment opportunities such as Environmental, Social, and Governance (ESG) funds. In 2019 almost 500 actively managed funds had ESG criteria in their prospectuses.

A recent survey found that 24% of millennials owned ESG stocks, but 33% weren’t sure what ESG funds were. Women were more likely to hold this type of stock, at 25% of respondents, versus 17% of male respondents.

Source: CNBC, Pew Research, The Motley Fool, Fidelity Charitable

Millennials are less likely to own stocks than Gen X

Millennial choices around asset classes might surprise you. Millennial investors are less likely to be invested in stocks than their Generation X counterparts, with 37% of millennials saying they would own stocks vs. 47% of Generation X. 66% of millennial investors and 73% of Generation Z investors utilize stocks in their investment portfolios, and growth and dividend stocks are among the most popular. Millennials report that they own 58% and 59% of each, respectively.

Millennials may fear losing money in a stock market crash, keeping them from entering the market at all, or delaying past a reasonable time. Entering the job market during the Great Recession, fluctuating real estate costs, and student loan debt has made millennials cautious in their investing strategies. One way to reduce the fear and emotions around investing may be to choose mutual funds, which hold multiple stocks in one group and help manage risk through diversification.

When evaluating a stock for purchase, millennials were more likely to look at traditional investing sites than Generation Z investors, who turned more to social media. Male investors were more likely to value historical stability, while female investors said social media factors had more value for them. Social media buzz was one of the least relevant factors for millennials when buying a particular stock.

Source: The Motley Fool, Investopedia

39% of millennials invest in cryptocurrency

While many of the younger generations are interested in cryptocurrency, digital currency is making significant gains among millennials. Almost 60% of millennial investors say that they hold some kind of digital currency, 38% said that they own cryptocurrency specifically, and 15% said that they possess a non-fungible token (NFT), which is a digital asset like bitcoin or dogecoin, but it replaces real-world objects like music, art, and videos.

Older and wealthier millennials are more likely to hold cryptocurrency than their younger counterparts. Fifty-nine percent of millennials earning at least $75,000 a year hold cryptocurrency, compared to just 21% that earn less than $75,000. Men are about twice as likely to invest in cryptocurrency than women.

There is some confusion about cryptocurrency, with about 44% of millennials saying that it's too confusing or risky for their investment money. Comparatively, 58% of baby boomers say that cryptocurrency is too confusing, and 49% of Generation Z and 48% of Generation X are also likely to say it's too confusing to invest in crypto.

Source: The Motley Fool, Investopedia

47% of millennials have mutual funds in their portfolios

Mutual fund investments continue to grow for millennials. Forty-seven percent of millennials invest in these funds compared to 35% of Generation Z. Mutual funds are the second most popular investment type for millennials after individual stocks, and exchange-traded funds (EFT) are third, with 23% of millennials choosing to invest in those.

Millennials typically look for diversification and safe investment strategies over high returns. Compared to baby boomers and Generation X when they reached age 40, millennials face more student loan debt (33.6% versus10.91% and 14.52%, respectively) and struggle to pay it back and meet other financial goals.

Research shows that millennials are working hard to move past these challenges and get out of debt. A recent report shows that millennials have more financial goals than other generations. Eighty-nine percent say that establishing an emergency fund is a crucial goal, 84% emphasize saving for retirement, and 89% of millennials work on creating and maintaining a budget.

Source: The Motley Fool, Investopedia, Morning Consult State of Consumer Banking & Payments

Millennials are not confident about investing

According to a CFA Institute study, only 21% of non-investing millennials and millennials who are only invested in retirement accounts are very or extremely confident about making investment decisions. When you add taxable investment accounts to the list, the amount of confident investors increases to 47%.

While millennial households had a higher median annual income than the United State’s median income in 2020 ($71,566 versus $67,521), they are still more likely to feel behind in their financial goals. More than 30% believe the money they've saved for retirement won't last. Only 37% of affluent millennials say they feel knowledgeable about their investing and financial topics, but those who do feel knowledgeable are five times as likely to feel confident when making financial decisions.

SourceCFA InstituteMorning Consult, US Census Bureau, Investopedia

41% of millennials own information technology stocks

Compared to 29% of Gen Z investors, 41% of millennials own information technology stocks such as software, IT services, computer and server hardware, and other electronic equipment. The information technology sector has played a pivotal role in advancing robotics and automation, especially with the increased demand for computers during the pandemic and the considerable increase in remote work. Forty-five percent of millennial men owned information technology stocks compared to 34% of millennial women.

In addition to owning more information technology stocks, 41% of millennials own financial stocks, compared to 42% of Generation Z investors. Emergent technology and healthcare also have high millennial involvement, with 39% and 38% of millennials owning each type of stock, respectively.

SourceThe Motley Fool

Millennials trust financial advisors

According to the CFA Institute, 72% of the millennials who work with a financial professional are either very or extremely satisfied. Only 15% of those who don’t work with a professional cited lack of trust as a viable reason not to work with one.

Additionally, 58% of millennials say they prefer to work face-to-face with a financial professional, which emphasizes the necessity of real people offering financial advice and retirement planning services. Only 16% of millennials showed a strong interest in using robo-advisors, although 61% approve of them as an investing tool.

Forty-three percent of millennials have a financial advisor. Millennials who considered themselves knowledgeable about investing were twice as likely to have a financial investor. Of those with financial advisors, 27% said their investments perform extremely well, compared to just 13% of millennials who said the same and didn’t have an advisor.

SourceCFA Institute and FINRA Investor Education FoundationInvestopedia, The Fool

67% of millennials utilize employer-sponsored retirement plans

While many millennials seem to be prioritizing saving for retirement, and 67% say that they participate in their employer-sponsored plans, there is still room for improvement. According to a Transamerica study, 21% of millennials do not have a job with an employer-sponsored retirement plan available. As pensions become less common, many millennials will have to rely on self-funded retirement savings.

Millennials with an employer-sponsored retirement fund contribute roughly 15% of their annual salaries to their 401(k) or similar retirement vehicle.

Source: Bank of America Millenial Report, Winter 2020, Transamerica Center

60% of millennials feel behind in retirement savings

Millennials are worried about having enough saved for retirement, and they feel left behind by their peers. About 60% of millennials said they feel behind compared to where they think they should be, and 38% don’t believe they’ll retire until they're age 70 or older.

The top financial stressor for millennial parents is not saving enough in general (44%), followed closely by not saving for retirement (38%). Seventy-seven percent of millennials say they’re concerned that Social Security won't be available when they are ready to retire.

Millennials have had some tough breaks, entering the job market during the Great Recession, which also impacted the housing market, and facing potential job loss or underemployment during the COVID-19 pandemic. Some used their retirement savings to survive during the pandemic, which has set them further behind their peers.

According to the CFA Institute, employer-sponsored retirement plans and family discussions offer a headstart to the individuals who utilize them. Forty-six percent of millennials with investment accounts credited their parents and family as key in their decision to start investing. The more millennials can invest in the stock market, both through their employer-sponsored plans and on their own, the easier it will be for them to feel comfortable about retirement.

Source: Bank of America Millenial Report, Winter 2020, CFA Institute, Investopedia, Transamerica Center

Millennials are comfortable with tech

Millennials are more likely to hold stocks in the financial (42%), information technology (40%), and emergent technology (38%) industries than previous generations, and they’re also more interested in using technology for investing, like apps and robo-advisors.

Like older generations, many millennials say they prefer to work face-to-face with a financial professional (58%). This is on par with baby boomers (60%) and Generation X (58%). Millennials are also early adopters of technology and have helped digital banking and robo-advisors gain popularity. They are likely to quickly adopt and use wealth-building and investment apps, which provide investment advice and an opportunity to build wealth passively.

Source: CFA Institute and FINRA Investor Education Foundation, Investopedia, The Motley Fool, Morning Consult

Millennials' financial well-being is lower than the national average

Despite being the largest generation currently working and with a head start on retirement savings, millennials’ economic well-being remains lower than the national average, according to a recent study.

The global average of financial well-being in December 2021 was 50.98%, but millennials were reported at 49.54%. The scores were even lower in the U.S. and Canada; millennials had a financial well-being score of 47.84%, up slightly from the low in October 2021 of 45.83%.

Twenty-seven percent of millennials said that they would never have the things they want in life because of money, compared to 22% of the general US population.

Source: Morning Consult, Investopedia

Affluent millennials invest as cautiously as Gen X

Millennials have cautious investing habits that are more in line with the previous generation. Millennials are less likely to own stocks than Generation X (37% compared to 47%) but are just as likely to hold bonds and CDs (19% vs. 18%). However, Generation X is more likely to invest in annuities, at 11%, compared to millennials at 9%.

Living through economic turmoil and crushing student debt may explain millennials' hesitancy to take more considerable investment risks with their available funds. Millennials are more likely to have taken a loan from a retirement account (44%) compared to Generation X (33%) and baby boomers (17%).

Source: Investopedia

Millennials would rather invest than spend

Millennial investors prioritize investing for the future rather than spending now and are willing to make trade-offs to stay on track. They are ready to cut back on wants, with 70% saying they’d cut back on dining out to achieve a financial goal, and 39% said they would cancel cable or streaming services.

Going a step farther, 44% of millennials said they would take on a side hustle to reach a financial goal faster, and 33% said they would stay in an unfulfilling job to pay the bills. Fifty-seven percent said they would rather stay in a less desirable position with a higher salary, while only 38% said they would take a more desirable job with a lower wage.

When asked what they would do with an extra $10,000, millennials said they would pay down debt (40%), followed by saving for a new house or investing in their current home (20%), with just 11% saying they’d put the extra money toward retirement and 10% saying they’d invest outside of retirement. Only 2% of millennial respondents said they would spend extra money on material things.

Source: Bank of America Millenial Report, Winter 2020

86% of millennials want to discuss finances openly

According to Australian publication CommBank, a massive 86% of millennials want to have open discussions about investing, and 50% of those want to discuss investing in the stock market. Men are more likely than women to say that they would like to have more open discussions about investing.

This openness to discussing money and investment strategies fits in with younger generations, who are more likely to receive investing information from social media. Millennials ranked social media buzz as the least relevant factor to consider when buying a stock, however.

Source: Commbank, The Motley Fool

How to get started investing

If all of this investing data has you excited to get started on your investing journey but nervous about making mistakes, don’t worry. Investing doesn’t have to be a complicated topic, but it is essential to know your priorities and the kind of timeline you have to reach those goals.

  • One of the easiest ways to start investing is participating in your company's 401(k) plan. Speak with your human resources department or manager about getting signed up if you haven't already. Be sure to ask if there’s an employer match and how much you have to contribute each paycheck to be eligible for the entire match.
  • If you want to be completely hands-off, research using a robo-advisor to manage your portfolio. Robo-advisors are generally lower cost than traditional investment accounts because they aren’t actively managed and can be a good option for someone who wants to invest but doesn’t want to manage day-to-day activity.
  • If you're more of a hands-on investor, consider mutual funds and ETFs, which group many different stocks into one bundle. When you invest in that fund, you own a small piece of each stock. Mutual funds and ETFs allow you to diversify your portfolio so you aren’t putting all of your money into one specific stock or stock type.

Once you’ve determined how you’d like to invest, set a budget for your investment contribution and let your money start working for you. Focus on investing over decades and try to ignore the daily ups and downs of the market.

For more information about how to invest money, check out the best investment apps and best brokerage accounts to help you get started.

Bottom line

Millennials have dealt with a lot of economic upheaval in their lives but appear to have a clear focus on saving for the future and getting ready for retirement, although there is some room for improvement. Although individual preparation may vary, as a whole, millennials are focusing on their financial health and creating a solid mix of traditional and alternative investment options.

Sources

1. Pew Research Center - Millennials are the Largest Generation in the Labor Force

2. Pew Research - Defining Generations: Where Millennials End and Generation Z Begins

3. Bank of America - Winter 2020 Better Money Habits Millennial Report

4. CNBC - Millennials Spurred Growth in Sustainable Investing for Years. Now, All Generations are Interested in ESG Options.

5. Investopedia - The Affluent Millennial Investing Survey

6. The Motley Fool - Study: What are Gen Z and Millennial Investors Buying in 2021?

7. Pew Research - Millennial and Gen Z Republicans Stand Out from Their Elders on Climate and Energy Issues

8. Investopedia - Younger Generations More Bullish on Cryptocurrencies

9. Fortune - Millennials and Gen Z are a Growing Force in Investing. The Market Needs to Catch Up.

10. CFA Institute and FINRA Foundation Study - Debunks Common Myths about Millennials and Investing

11. Morning Consult - The State of Consumer Banking & Payments

12. Transamerica Center for Retirement Studies - Living in the COVID-19 Pandemic: The Health, Finances, and Retirement prospects for Four Generations

13. Investopedia - Millennials: Finances, Investing, and Retirement

14. Commbank - 43% of Millennials are Investing Instead of Spending: CBA Study

15. United States Census Bureau - Income and Poverty in the United States: 2020

16. Fidelity Charitable - Using Dollars for Change

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Source

https://financebuzz.com/millennial-investing-trends