Millennials — people born between 1980 and 2000 — are being closely followed by the investing world. After all, this cohort seems to be a key growth driver of the U.S. economy, outpacing baby boomers in 2015 and reflecting over a quarter of the nation’s population.
Not only this, millennials are likely to inherit as much as $68 trillion from their parents, per a CNBC article. And compared to previous generations, they have way more choices to diversify and invest this huge inheritance. Businesses that will likely benefit from their habits could offer solid returns to investors.
Per research by Global X, millennials now earn about $2 trillion, with income projected to grow to $8 trillion by 2025. Millennials’ spending is likewise expected to rise to $1.4 trillion annually and account for 30% of total retail sales by 2020, according to Accenture (NYSE:ACN).
Against this backdrop, while pure-play millennial ETFs like GLOBAL X Millennial Consumer ETF MILN and Principal Millennials ETF GENY should benefit from such massive inheritance, some other sectors should also win. We highlight a few ETF strategies that are well-connected with millennials’ behavior.
Millennials Are “Generation Green?”
Millennials are eco-conscious to the extent of tweaking their shopping patterns for going green. And some of them are even willing to pay more for eco-friendly products versus their low-priced alternatives. Increasingly termed as “Generation Green,” millennials and Gen Z demonstrate environmentally and socially-conscious consumer behavior, per a Capgemini report.
No wonder their investing pattern would also reflect this and socially-responsible ETFs would attract more of millennials’ net worth. Millennials have driven the growth of sustainable investing in recent times. About 76% of older millennials think climate change is a big threat, according to a survey conducted by The Harris Poll on behalf of CNBC. About 33% of millennials often or exclusively take ESG-friendly investment decisions, compared with 19% of Gen Z, 16% of Gen X and 2% of baby boomers, according to the poll.
iShares Global Clean Energy ETF (NYSE:XLE) ICLN, iShares ESG MSCI U.S.A. ETF ESGU and iShares ESG MSCI USA Leaders ETF (SUSL) are some of the ETFs that should gain from millennials’ massive inheritance (read: ESG Investing Is Hot: Bunch of New ETFs Hit Market in August).
Home Buying: Millennials’ Preference
Though the percentage of millennials staying with their parents has risen over the years, many millennials are now reaching prime home-buying age — 30 to 35 years old — and that could drive sales for homebuilding companies.
John Lovallo, home builder analyst for Bank of America Merrill Lynch (NYSE:BAC), noted that “in 2025 there are going to be 3 million more millennials than baby boomers at their peak in 1987,” which could propel the home-buying industry. SPDR S&P Homebuilders ETF XHB could thus benefit to a great extent.
Broader Technology: A Sweet Spot
Millennials are known for their obsession with technology. Nearly 100% of millennials use the Internet, according to 2019 Pew Research Center data, and 19% are smartphone-only Internet users. That’s more “smartphone-only” people than in the three other generations surveyed, as quoted in a Forbes article.
Apart from these, downloading music/videos and watching TV online are common practices among millennials. A huge section of millennials is quite savvy with social media. According to a recent survey by the National Association of Personal Financial Advisors, 62% of millennials get their financial advice online or from social media, per a CNBC article. Invesco NASDAQ Internet ETF (PNQI), Global X Social Media ETF SOCL and Technology Select Sector SPDR Fund (XLK) should thus catch investors’ attention.
Millennials Becoming Car-Loving Too
Amid the coronavirus pandemic last year, millennials surpassed sales of larger pickups from baby boomers (born between 1946 and 1964) and are on their way this year to top Gen X buyers (born between 1965 and 1976) as the top buyers of mid-size and compact pickups, according to J.D. Power, quoted on CNBC.
The specific car segments are known as light-duty trucks. They marked 2.85 million sales, or 20%, of the U.S. new vehicle market in 2020, per the same CNBC article. First Trust NASDAQ Global Auto Index Fund CARZ should emerge as a winner from this trend.
Organic & Healthy Food Habits
Millennials are currently the driving factor behind organic produce sales. This section of the population is health-conscious and aware of the importance of food standards and production methods. This bodes well for Global X Funds Global X Health BFIT.
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SPDR S&P Homebuilders ETF (XHB): ETF Research Reports
iShares Global Clean Energy ETF (ICLN): ETF Research Reports
First Trust NASDAQ Global Auto ETF (CARZ): ETF Research Reports
Global X Social Media ETF (SOCL): ETF Research Reports
Global X Funds Global X Millen (MILN): ETF Research Reports
Principal Millennials ETF (GENY): ETF Research Reports
Global X Funds Global X Health (BFIT): ETF Research Reports
iShares ESG Aware MSCI USA ETF (ESGU): ETF Research Reports
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