It’s time for fresh-faced millennials to Google search two words: “portfolio diversification.”
Amid the impressive years-long run in the stock market, it would appear that newbie millennial investors are doing as little homework as possible in the pursuit of quick profits. Instead, millennials are mostly plowing into overheated tech stocks that are probably familiar to one’s ear — but possibly overvalued by now. And in doing so, this class has created portfolios of stocks that tend to trade in sympathy with one another.
According to a new study by Apex Clearing, the top 10 stocks owned by millennials in the U.S. include Apple, Amazon, Facebook, Microsoft, Berkshire B, Disney, Netflix, Advanced Micro Devices and Alibaba. Apex Clearing analyzed 734,000 investment accounts owned by U.S. investors with an average age of 31 years. More broadly, 30% of the top 100 holdings by millennials are tech companies that have gone public in the past 10 years.
The study shows that millennials are all invested in the move to streaming content, not withstanding the purchase of Berkshire B shares because they know 89-year old Warren Buffett is a billionaire investor. They are also bullish on the future of transportation: money-losing tech companies Uber, Lyft and Nio cracked the top 100 holdings among millennials.
Apex Clearing CEO Bill Capuzzi says millennials are following the strategy pioneered by famed money manager Peter Lynch, buy what they use.
“If you look at this list, roughly 30% of them are tech companies that have IPO’d in the past 10 years — in their generation. These are things they are using,” Capuzzi said on Yahoo Finance’s The First Trade.
Nevertheless, millennials would be well-served to put down Instagram for a a bit and crack open an investing textbook.
If this new class of investors were studying company fundamentals such as earnings growth, cash flow growth and valuations, they wouldn’t simply be piling into the tech stocks of the goods and services they use each day. Valuations matter, especially in a bull market that is starting to look long in the tooth.
Lynch also stressed diversification and doing intense stock research. Memo to millennials.