Millennials are doing everything differently. Whether it’s method of transportation, social media, or even the consumption of avocado toast, the behaviors and taste of young people have been markedly different than those of the previous generation. Across all facets of life, most things have been digitized - even investing. Trading has become mobile at a rapid pace, with major sites like E*TRADE, TD Ameritrade, Fidelity, and Schwab, that once dominated the space, becoming less fashionable among young investors. Instead, they are opting for apps like Robinhood, an economical, commission-free trading app that gives users the power to purchase stock in most listed companies within seconds. Over time, the reasons for this evolution has become abundantly clear, showing this switch is here to stay. The first reason as to why this is occurring should be obvious - mobile trading apps are, well, mobile. Even for the most technologically savvy generation to date, computer usage has dropped significantly as 20% of millennials have gone exclusively mobile. As ridiculous as it may sound, it is the truth. With the first cohort of trading platforms being computer-based, new and easy to operate trading apps have naturally gained the millennial market share.
As reported by TechCrunch, Robinhood is now worth $1.3 billion, only four years after its initial launch (2013), making it into one of Silicon Valley’s ‘unicorns,’ which is the term for startups that are valued above $1 billion. Robinhood’s growth spurt doesn’t come with strings attached, though. Other investing platforms are still steadily growing (with the exception of Fidelity) making one wonder: shouldn’t this be taking customers from other major investing platforms? Or, is it attracting more people to purchase stocks?
Simply put, yes. Platforms like Robinhood are creating new investors, seemingly out of thin air. Millennials, who are now known to be less financially stable than their parents, are now turning to varied alternatives for income. Investing, which used to be mostly for high-income traders who could afford high commission fees, now has a new face - the young and frugal. In fact, this sentiment is reflected by investing habits monitored and allocated by Robinhood. In an interview with Business Insider, Robinhood CEO Vlad Tenev explained that users that skew on the younger side are building extensive and diversified portfolios with the small amount of leftover money they have, normally buying a variety of stocks - only a few shares each - and letting it grow naturally. In a way, Robinhood and other commission free apps have become platforms for users to save their extra cash while gaining a profit simultaneously.
The advent of social media has also been a factor in appealing to young investors. One such app that clearly reflects this is StockTwits, an app that is essentially Twitter but with the addition of a personalized watchlist and stock quotes. Now, if one wishes to, they may tweet out their opinion or due diligence of a stock to the world of StockTwits, letting others know of their sentiment of the company. For those with insightful (or profitable) advice, they may gain quite a following. Similar to Twitter, they can also create quite the following if they are loud enough. Apps like this serve to globally connect users and form communities of people who wish share their opinions and information to others who have the same interests. For millennials, who overwhelmingly hold social media tools dear to them, this is important in attracting new investors that want to be connected online for all of their digital activities.
As for the old guard investing platforms such as E*TRADE and Schwab, the future isn’t all too dark. Financial and investing institutions do offer many things that Robinhood does not, such as the ability to invest in mutual funds, computer and mobile based applications, and quality research tools. As millennials age and earn more money, these companies will likely become more appealing - as they normally do with seasoned investors. In fact, these companies will possibly be thankful to the new and hyped-up investing apps for the plethora of users that they brought the world of investing. Whether or not the boom in interest for stock trading is just another fad among the fidget-spinner-generation, it is certainly reflective of their digitized, online, and wary circumstances.
“ComScore: Computer Usage Falls as 20% of Millennials Go Mobile-Only - ExtremeTech.” Accessed July 31, 2017. https://www.extremetech.com/computing/226867-comscore-computer-usage-falls-as-20-of-millennials-go-mobile-only.
“Fidelity Investments Lays off Hundreds Following Buyouts: Report - Boston Business Journal.” Accessed July 31, 2017. https://www.bizjournals.com/boston/news/2017/07/11/fidelity-makes-hundreds-of-layoffs-following.html.
Shontell, Anna Mazarakis and Alyson. “Millennials Are Buying Stocks instead of Coffee or Stuff on Amazon.” Business Insider. Accessed July 31, 2017. http://www.businessinsider.com/robinhood-ceo-how-millennials-invest-in-stocks-2017-7.
“Millennials Earn 20% Less than Boomers Did at Same Stage of Life.” USA TODAY. Accessed July 31, 2017. https://www.usatoday.com/story/money/2017/01/13/millennials-falling-behind-boomer-parents/96530338/.
“Robinhood Stock Trading App Latest Round Valued at $1.3 Billion - Business Insider.” Accessed July 31, 2017. http://www.businessinsider.com/robinhood-stock-trading-app-latest-round-valued-at-1-billion-2017-3.
“StockTwits Message.” StockTwits. Accessed July 31, 2017. http://stocktwits.com/.
“Unicorn (Finance).” Wikipedia, June 25, 2017. https://en.wikipedia.org/w/index.php?title=Unicorn_(finance)&oldid=787531181.