Home > Legal Guide

How can Mutual funds appeal to Millenials?

Mutual funds are an important part of any investment portfolio and have been for many years. Young investors that are a part of Generation Y, also known as Millenials, may have a tendency to shun old investment institutions like mutual funds because they perceive them as being out of touch with modern values. However, there are several ways that today’s mutual funds may appeal to younger investors that want to start strengthening their portfolios. You should speak to someone with an LLM in tax before investing in anything.

Ease of Diversification

CNN Money defines a mutual fund as a pool of money from a large number of investors that create a collective portfolio of bonds, real estate, stocks, and other securities. Every investor gets a portion from the return on the portfolio. Because of the large amount of different investments, it is easy for a new investor to keep their portfolio diverse. Diversity is especially important for Millenials that are investing without a great deal of experience or insight as to which specific places are best for their money. Also, mutual funds generally require a small minimum investment, which means the price of creating a diversified portfolio is much lower with a mutual fund. This is key for Millenials that most likely do not have a tremendous amount of money to invest with.

A Longer Investment Window

Younger investors have more time to gain returns from their investments, which means that they do not have to shy away from funds that have large swings but may provide a greater reward in the long term. Older investors, on the other hand, cannot afford to wait while a fund recovers from a downswing, because they are looking to retire relatively soon after they invest their money. Millenial investors do not have to dump a fund after a bad quarter or even a bad year, because they have plenty of time between the time that they invest and the time that they need to turn their investments into money that they will survive on during their retirement.

Digital Access to Investment Information 

Millenials rely on the Internet for many different things, including workplace productivity, communication, and recreation. Learning about investments is no exception. According to the online publication Financial Planning, those that use the Internet the most are under the age of 35. These users access the Internet at least once each day. What’s more, 81% of those that own mutual funds go online to access information on their investment or bank accounts, compared to only 55% of individuals that do not have mutual funds. 56% of all mutual fund owners utilize online sources to get investment information, but less than a quarter of individuals that do not have mutual funds access these online sources. Many young people are enticed by the idea of being able to manage their mutual funds in a completely digital way, as they are used to using these platforms to do other things in their lives.

Mutual funds can sometimes be difficult to market to a younger generation of investors. Jon Stein, CEO of the advisory service startup Betterment, told the Wall Street Journal that the main problem with mutual funds is that they go against modern ideas of current consumption that young people find very attractive, such as buying fast cars, jewelry, and luxury items like yachts. However, there are some distinct advantages that mutual funds hold for younger investors that want to be sensible about their finances so that they can protect their wealth further down the road.

comments powered by Disqus