Contrary to expectations for inexperienced investors, financial data indicates the young are not panic selling during this stock market drop. In fact, it seems many are remaining calmer than their older (and supposed wiser) counterparts.
Apex Clearing manages the infrastructure and operating systems for financial services companies such as stock-trading app Robinhood and robo-advisor Betterment. While U.S. stocks plunged in their worst day in years on Monday, Apex said that across its 7.6 million accounts, there was 56 percent less activity among the so-called millennial age group than older investors.
“The millennials were in a ‘set it and forget it’ mode by our data,” Apex CEO Bill Capuzzi said in a phone interview.
The age category typically refers to 18 to 35-year-olds, the largest living generation in the U.S. The average age of an Apex account holder is 31, the company said.
Among automated financial advisory services known as robo-advisors, Capuzzi said Apex has 2.6 million accounts and counts one major firm, Betterment, as a client. On Monday, those robo-advisory accounts only saw slightly more sellers than buyers, Capuzzi said, noting that resulted in a 0.23 percent net decline in assets under management.
Other financial firms with younger customers reported a similar trend.
Robinhood said its customers — more than three-fourths of which are millennials — tended to view Monday’s sell-off as a buying opportunity.
“Retail investors deposited 20 percent more funds into their Robinhood accounts [Monday] than they did on Friday,” the company said in a statement. “This behavior is in line with our investors’ trading behavior during the August 2015 Dow drop as well as the day following Brexit.”
Wealthfront, an automated financial advisor, said it has not seen a correlation between client withdrawals and market performance for the four stock corrections the company has experienced. The company used to be an Apex client and said 85 percent of its just over 190,000 clients are age 45 or younger.
“We see clients withdraw[ing] from their accounts for things like a downpayment on a home, which is why we just launched a home planning service,” CEO Andy Rachleff said in a statement.
A company representative did note that clients with smaller Wealthfront accounts, of less than $500, tend to be the first to withdraw. Those with more invested generally did not make changes during periods of market turmoil.
For all the indications that younger investors may be catching onto a “buy-and-hold” stock investment strategy, it’s important to note that millennials have much less to invest, and to lose, by staying in the market than their parents who are close to retirement.
The head of a household under the age of 35 in 2013 had a net worth of $6,900, versus $202,950 for those age 65 and older at the time, according to the latest available data from the U.S. Census Bureau.
Younger investors are also typically more interested in investing in cryptocurrencies such as bitcoin than stocks. An October survey by Harris Poll for Blockchain Capital found that 27 percent of American millennials prefer $1,000 worth of bitcoin to stocks, versus just 5 percent for those over age 65.
Apex Clearing said it opened 904,000 accounts in January, roughly twice the average. That growth was “largely attributable to crypto,” CEO Capuzzi said, citing Robinhood’s late Janaury announcement that it will begin rolling out bitcoin and ethereum trading in February.