It’s a tale as old as time: Australian millennials have long been classified as avocado toast connoisseurs and online shoppers. Five years ago, this generation was far from being branded as financially savvy.
But as investing gains traction among younger generations, are the tides changing?
A new report from online trading provider Global Prime looks at the differences in perceived financial literacy between parents and millennials, as well as their general attitudes towards wealth-building strategies like investing and trading.
What they’ve found could change the way you think about twenty-somethings and their financial philosophy.
In this article:
- Millennials put their money where their mouth is
- Not just a young man’s game
- Want to invest, but not sure how?
- The bottom line
Millennials put their money where their mouth is
Global Prime interviewed Aussies to see what they thought about financial patterns across different age groups.
Interestingly, the research shows that most Australians believe that millennials and Gen Z are more financially savvy than their parent’s generations.
It seems the Reddit phenomenon is paying off: 57% of Aussies think millennials are more interested in trading and investing than previous generations.
But it’s more than just a trend; from this group, one in three respondents said millennials are better educated around finance.
So, just why are millennials interested in investing? Aussies think they’re in it for the long haul — 37% of respondents said millennials are more interested in building long-term wealth.
A more fractured, flexible work routine could also play a role: one-third of respondents said millennials have more time on their hands for hobbies and side hustles.
When asked why Millennials and Gen Z might be more interested in investing and trading than previous generations, survey respondents said it’s due to an increase in podcasts and online educational resources around financial independence, leading to greater financial awareness among younger generations.
Respondents also suggested the recent hype around cryptocurrencies, in addition to the rising cost of living and housing unaffordability, has given the younger generations a stronger drive to make money earlier than their parent’s generations.
Not just a young man’s game
It might be a rising trend among younger generations, but there’s no age that determines your investment appetite or success.
Global Prime director and co-founder Jeremy Kinstlinger said it’s encouraging to see so many millennials and Gen Z taking an interest in investing and trading and focusing on their long-term financial future.
“When it comes to trading, people from any age group can find success — it doesn’t matter what age you are, what matters is whether you do your due diligence and take the time to learn about proven trading strategies before jumping straight in,” he explained.
Business partner and co-founder Elan Bension believes age shouldn’t be an obstacle.
“Within our trading community, we have successful traders in their late teens and early twenties, and we’ve also got successful traders in their 70s and beyond,” he noted.
“What all these people have in common is that they don’t let their emotions get the better of them or get swept up in the hype of the latest trending ‘finfluencers’ on social media.
“They do their research first and focus on learning the psychology of trading, giving themselves the best chance possible at achieving long-term success.”
Want to invest, but not sure how?
Are you a millennial or parent thinking of dipping your toes in the pool? Here are Kinstlinger and Bension’s top tips:
Be realistic about your returns on capital
Remember, this isn’t a get rich quick scheme, and often slow and steady wins the race. Do your research first, start off small, and once you build your confidence and skill take your trades to the next level.
Also, beware of brokers offering super high leverage. If a broker is offering 500x leverage, then they are most likely profiting from your losses.
They know full well that this is disastrous for most beginners, yet super high leverage is marketed as something you need to trade with, when really you don’t need it to be a successful trader.
Risk management is everything
If a trader goes in without a good understanding of risk management, they are more likely to lose. Trading involves risk of capital loss, especially when trading with leverage.
There are risks such as black swan events that may wipe out an entire account if the trader took on too much exposure (AKA risk) on their account.
Ask to see trading receipts
Brokers trading against clients and profiting off their losses is a common practice in the CFD trading industry. This practice is also known as ‘B-booking’ and means the broker’s interests are not aligned with yours.
Ask your broker if they have any sort of system that shows which bank has filled your trade. If they don’t, then you won’t be able to know for sure that they aren’t profiting from your losses.
Psychology and learning to control your impulses is paramount
You could have the best strategy in the world, but without the right mindset a trader is bound to lose eventually.
A trader needs to be cool and calculated and not adjust their trading based on their emotions. Unless a trader has learned to manage their impulses and emotions, they will most likely run into problems.
Plan your trade, trade your plan
Trading without a plan can and should be likened to gambling. Eventually, the ups and downs a trader goes through will lead to poor decision making and ultimately to the loss of capital.
Having a set plan and strategy in place and journaling trades helps to stick to the plan which means not making decisions on the fly. Knowing when to enter and exit a trade before the trade is entered and not adjusting mid trade will help you to stay on track.
Find a trading mentor
It’s information overload online when it comes to finding a strategy to trade with. A trader must find a strategy that works for them and their circumstances, and it can be tough for a beginner to sift through the information and formulate a plan.
Having a great mentor can really help push a trader in the right direction, and if they take it seriously, they can be held accountable to their trading mentor as well, just like a sporting coach.
The bottom line
You’ve got some good tips to start off, but often the hardest part is making that first step into the investing universe.
To that, Kinstlinger says: “If you are savvy about doing your own thorough research, find a trustworthy mentor and trade with a strategy in place, then you’re off to a good start.
“The online trading industry has made trading accessible to thousands of people from all walks of life.
“We believe that it is important every trader is fully aware of the potential risks involved, and able to make informed choices.”