BORN in the early 1980s and beyond, Generation Y (Gen-Y) are the fastest growing segment of today’s workforce.
Displaying characteristics such as being tech-savvy and achievement-orientated, most of them are, however, also known to shun the stock market.
According to Dow Jones-owned Marketwatch, which operates a financial information website providing business news, analysis and stock market data, the Gen-Y actually suffer from “post-traumatic stock syndrome”.
“The early vanguard of the Gen-Ys joined the real world only to experience the dotCom crash. They subsequently started investing in their mid-20s only to find the housing bubble and the subsequent recession. The first impression is the most important and so far it doesn’t look promising.
“This lack of tangible gains, roller-coaster volatility and recent scandals such as the bank bailouts, mortgage shenanigans, Ponzi schemes and scandals like Goldman’s designed-to-fail securities, have all made them cynical and distrusting of the stock market and investing in general,” says Marketwatch columnist J.J. Zhang.
On the local front, the situation is no different. Gen-Ys, who despite being technologically savvy, are comfortable conducting transactions online but not actively trading or investing yet, notes Kenanga Investment Bank Bhd executive director and equity broking head Lee Kok Khee.
“We believe this is due to lack of awareness. That’s why this group of individuals need to be educated further,” he tells StarBizWeek.
Lee says that Kenanga has committed to bridge the generational divide by embarking on a series of e-trading initiatives that will encourage a new breed of investors, primarily from the Gen-Y group and to increase the capacity of its remisiers to focus on more customised brokerage services.
“The way to encourage trading in the stock market is through our remisiers and an online platform, which the Gen-Y group of individuals can use to gain more confidence.
“Furthermore, having an online platform makes it easier to reach out to the Gen-Y,” he says.
Kenanga will be launching a youth-targeted online platform called the “Stock Challenge” game in the final quarter of this year, whereby participants will be able to use virtual money to trade and win prizes.
“We’re targeting individuals with not a lot of investing experience and get them familiar with the stock market. Of course it won’t just be limited to online. Participants can access the game via their mobile phones as well,” says Lee.
To promote the launch of the game, Lee says Kenanga will be conducting a lot of on-ground activities to create more awareness.
“The promotional activities will be done for about three months. We will be visiting colleges and investor clubs to gain more awareness. We will likely be working with Bursa Malaysia on this.
“Given that this platform is tech-driven, it will help attract the Gen-Y and also create more business for Kenanga. It will create more opportunities for our remisiers to do more business.”
Kenanga’s equity broking’s online business currently contributes about 50% to its equity broking retail business and 20% to its overall business.
Kenanga’s Stock Challenge game, which is primarily intended to get youths investing in the stock market, is in line with Bursa Malaysia’s recently launched platform, “Bursa Marketplace,” which is aimed at encouraging investing behaviour among retail customers – especially among the Gen-Y.
The Bursa retail platform, which was launched earlier this year, is aimed at providing retail investors with comprehensive, accurate and timely market data. It provides broker research reports, market insights, trading ideas and the unique S&P AlphaFactor analytical tool to help Malaysians invest and trade confidently.
According to Bursa statistics as at March 2014, local retail participation accounted for 19.71% in terms of total value traded (RM43.4bil) and 48.99% in terms of volume traded (37.9 billion shares).
This means the potential for reaching out to new investors, especially among the Gen-Y.
According to licensed financial adviser and syariah financial advisory for Excellentte Consultancy, Jeremy Tan, Gen-Ys lack knowledge in the areas of investing (including in equity market) and do not see the need to invest.
“Most of the needs and wants are provided by their parents, the Baby Boomers.”
He says this segment also displays short-term gratification and are willing to sacrifice future consumption needs.
“Also, the present wage structure and remuneration has not increased in tandem with real inflation rate. As a result, managing and maintaining a positive monthly cashflow is extremely difficult but not necessary impossible.”
Tan believes that the Gen-Y needs to be educated in the areas of financial planning.
“This would include education on the need for investing and its purposes – as a hedge against inflation and making their money work for them rather than continuing to work for money.
“Stock or equity investment, meanwhile, is not as simple as buying low and selling high. There has to be education on value investing and not speculative investing.”
Citing a survey, Zhang meanwhile claims that 40% of Gen-Y agreed with the statement “I will never feel comfortable investing in the stock market.”
Among Gen-Y investors, 54% feel overwhelmed by available choices and 47% tended to put off investment decisions, he says.
“Due to fear of risk, 30% said their primary investing objective is protecting principal and have allocated an average of 30% to cash, more than other age groups, and nearly equal to the 33% allocated to stocks. T. Rowe Price noted in 2010 that one in five self-directed participants age 25-35 had over 80% of plan assets in cash.
“While protecting principal is no doubt important, excessive risk aversion does not lend well to long-term investing: after all, no pain, no gain. With 54% of Gen-Y concerned about when they would be able to retire and 44% lowering their retirement expectations, they need to put aside their fears and tip-toe back into the markets.”
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