The Wall Street Journal - 16.03.2020

R6| Monday, March 16, 2020 THE WALL STREET JOURNAL.

FROM TOP: RAUL ARIANO FOR THE WALL STREET JOURNAL; BENJAMIN RASMUSSEN FOR THE WALL STREET JOURNAL

heard of ESG investing. After the con-

cept was explained to them, 44% said

they would be interested in socially re-

sponsible investments vs. roughly a

quarter of Gen-Xers and baby boomers.

“With some continued confidence

and education, we may see ESG funds

grow among millennials as the interest

is there, but the familiarity isn’t,” says

Kelly Lanan, vice president for young

investors at Fidelity Investments Inc.

Among Fidelity’s millennial clients, none

of the top 10 most popular passive mu-

tual funds by invested assets focus on

sustainability.

Drawntotechstocks

Among millennials who do invest,

work-sponsored 401(k) plans are the

most popular financial product at 41%,

the survey found, followed by individual

retirement accounts at 25%. About 19%

say they invest in mutual funds and ex-

change-traded funds, while 15% invest

in individual stocks.

Nina Gunderson, a 27-year-old finan-

cial adviser at UBS in New York, began

investing through a work-sponsored re-

tirement plan. She says buying stocks in

environmentally and socially progressive

companies doesn’t drive her portfolio.

“I’m trying to think about invest-

ments where they provide stability,

where there’s opportunity for growth,”

she says.

ESG investments are rarely found in

401(k) plans and IRAs, according to the

American Retirement Association’s Plan

Sponsor Council of America. In 2018,

only 2.9% of 401(k) plans had an ESG

fund in their lineup, while the group es-

timates that just 0.1% of total IRA plan

assets were in ESG funds.

For now, the choice for many mil-

lennials is target-date funds, which

grow less risky as a target date ap-

proaches. Target-date funds are the

default option in many company-spon-

sored retirement plans.

Fidelity, whichmanages about $3.2

trillion, says that 58% of millennial as-

sets in its 401(k) plans were in target-

date funds at the end of 2019. Among

millennials who have all of their sav-

ings in 401(k)s, the share rose to 70%.

Among millennials whose invest-

ments are self-directed, holdings skew

heavily toward trendy technology com-

panies. The top stocks they held as of

the end of December were Apple Inc.,

Amazon.com Inc., Tesla Inc., Facebook

Inc. and Microsoft Corp., according to a

survey by Apex Clearing of more than

730,000 U.S. investor accounts with an

average age of 31 years and 3 months.

The average account held about $2,300.

While many of these companies of-

ten appear in the holdings of ESG funds,

there is nothing to suggest millennials

are buying them for that reason.

Of the top 100 stocks held by

millennial investors surveyed by

Apex, 30% of holdings were in tech

companies, 25% were services

companies and 24% were con-

sumer-goods firms. Bringing up

the rear were utilities at 0.2%, ba-

sic materials at 1.5% and industrial

goods at 3.3%. Oil giants Exxon

Mobil Corp., Chevron Corp. and BP

Lucas Brito says he and his peers are comfortable investing in tech companies because they grew up with their products.

JOURNAL REPORT |MILLENNIALS & MONEY

M

illennialsmay

be more pas-

sionate about

environmental

and social-jus-

tice causes

than previous

generations,

but those val-

ues have yet

to make a significant impact

on how they invest.

Part of the disconnect, according to a

survey conducted in September 2019 for

The Wall Street Journal by MarketCast,

is that many millennials simply aren’t fa-

miliar with socially responsible investing

or don’t want to commit to it until they

become more financially literate.

Katie Irwin, a 33-year-old accountant

who works for the state of Colorado,

has been investing for three years. She

says that while she cares about how

her investments might impact the

causes she supports, she needs to learn

more about finance before she starts

investing based on environmental, social

or governance (ESG) criteria.

“I want to be able to understand

where and why and what I am investing

in,” says Ms. Irwin, who has a pension

plan through her job and a target-date

fund through Vanguard Group.

It is a familiar theme for many in her

generation.

According to the survey, the top pas-

sion causes among millennials, defined

as those born between 1981 and

1996, are climate change at 41%, fol-

lowed by human rights, poverty re-

duction and safe work environment,

each at 39%, and environment sus-

tainability at 38%.

The same survey also found that

nearly half of millennials want to

start investing but don’t know

where to begin, and an overwhelm-

ing 87% of millennials had never

BYDIETERHOLGER ANDSABELAOJEA

When Their

Money Isn’t

Where Their

Mouths Are

Millennials say they

care about certain

causes. But they aren’t

investing that way.

18%

Have made

investment

decisions based on

ESG principles

Inherited wealth

Many millennials say they have too much

student debt to even think about invest-

ing. Some 34% of the millennials in the

Journal survey say they have so much

student-loan debt that it’s a challenge to

save for the future, while another 52%

“feel overwhelmed by financial burdens.”

“If you have debt, it’s literally just going

to be a wash if you’re putting that into

the market,” says Lauren Simmons, who

at age 22 became the youngest trader

and the second black woman to work on

the New York Stock Exchange floor.

Now 25, Ms. Simmons is working to

launch a TV show to help young people

with their finances.

“Having a conversation about

millennials and investing is

tricky because most of them are

not in a position where they

should be investing,” she says.

That situation might soon

shift, however. It is estimated

that millennials as a whole will

inherit trillions of dollars from

their parents, in what is ex-

pected to be the largest wealth

transfer in history, says Danan

Kirby, a 35-year-old client portfo-

lio manager atThornburg In-

vestment Management in

Santa Fe, N.M.

Mr. Kirby, who has been pro-

moting investing based on ESG

for more than 10 years, believes

that once millennials have more

assets and become more edu-

cated about finance, they will

put money into socially responsi-

ble investments. “It will transfer

into investing because it’s al-

ready in the millennial’s mind-

set,” he says.

Thornburg’s clients, who are

mostly financial advisers, are in-

creasingly seeking to recast their

practices around sustainability as

they prepare fora wave of mil-

lennial clients, Mr. Kirby says.

Those advisers could be well-po-

sitioned to attract the quarter of

millennials in the WSJ survey

who say they prefer to go to a financial

expert to learn about finance.

“The industry at large needs to do a

much better job communicating with

millennials as a whole about invest-

ments in general. Quite specifically, sus-

tainability,” Mr. Kirby says.

Mr. HolgerandMs. Ojeaare reporters

for The Wall Street Journal and Dow

Jones Newswires in Barcelona. Email

them [email protected]

[email protected].

PLC also made the list.

Lucas Brito, 28, is one of these young

investors who has a penchant for tech

companies. He has traded Facebook

stock in the past despite concerns about

the company’s handling of user data,

but has donated his earnings from Face-

book to causes he cares about. “If they

hold so much of my data and are mak-

ing a profit off my data, I might as well

get a cut of the pie,” Mr. Brito says.

He started trading stocks back in

2018 for fun, realizing it wasn’t so differ-

ent than selling in-game credits on the

popular online game “World of War-

craft.” “It’s like a virtual casino,” he says.

Mr. Brito, who works for a video-

game company in Shanghai, China, says

he and his fellow millennials are com-

fortable with tech companies because

they grew up with them and under-

stand their products. He also thinks the

sector has had exceptional growth

compared with industries such as oil.

“How can you say it’s a bad invest-

ment to invest in them? All the big

four grew so much in the last few

years. When you compare [them] to oil,

you’re sort of like, ‘Huh.’ ”

Katie Irwin wants to be “able to understand

where and why and what I am investing in.”

My top priority is paying my rent

and living expenses. Then I will

focus on ‘fun money’ for my wife

and I. Then I will focus on savings

and investing when possible.”

Eslam Mohamed, 25, medical student