While millennials may sometimes be seen as flippant in their attitude towards wealth, this is far from the reality as many young adults are financially aware and understand the importance of saving and investing for the future. When it comes to millennial wealth management, this tech-savvy generation also expects convenience and automation in their investments while demanding top value for their dollar and solid returns from their investments, says Affin Hwang Asset Management chief marketing & distribution officer Chan Ai Mei.
In an interview with Smart Investor, Chan gives her take on Malaysia’s millennial investors.
Smart Investor: Technology and innovation have altered the investment landscape, especially for millennials. How has the investment landscape evolved?
Chan Ai Mei: Millennials are certainly more discerning when it comes to investing. A product of their environment, this digital-savvy generation desires much more convenience and automation in their investments without necessarily going through a financial adviser.
Most millennial investors instead prefer a DIY-approach and doing away with face-to-face meetings or phone calls. Also known as a generation of instant gratification and speed, you would be hard-pressed to find millennials which aren’t glued to their smartphones.
As a result, asset managers today have to evolve together and cater to the needs of this new generation through a rich front-end digital platform (whether through an app or an online portal). The objective here is to create a seamless investing experience from the process of on-boarding, selection of funds, making a deposit, fund transfers, portfolio monitoring and financial advisory.
How do you think millennials differ in their investment approach and what do they desire from their investments?
Millennial investors are very savvy consumers and they do pay a lot of attention to cost. These includes not just consumer goods and services, but also extends to financial products. However just because an item is cheaper, it does not mean that they are willing to forgo quality. They still demand top value for their dollar and want solid returns from their investments.
Another area that millennial investors might differ are their value systems and openness towards championing a cause that they believe in. Most millennials would only invest if it is aligned to their own personal values and they can see sustainable outcomes. This has also led to the rise of impact investing as well as the growing importance of environmental, social and governance (ESG) considerations.
Millennials sometimes get a bad rap about their attitude towards wealth and can be rash in making financial decisions. What’s your take on this?
We think more credit should be given to millennial investors. There are a lot of assumptions about millennials being reckless about their finances and only knowing how to live in the moment. However, most are financially aware and understand the importance of saving and investing for the future.
A key factor that may be hindering millennial investors from achieving their goals is perhaps in striking a balance between immediate and delayed gratification. Learning to control one’s impulses and practicing self-control would ultimately help investors achieve their long-term goals. However, striking a perfect balance may be difficult to achieve with competing priorities.
That’s why it’s crucial that investors first sit down and properly plan their investment goals (both short-term and long-term) and then draw up a financial roadmap towards achieving them. Don’t be afraid of setting ambitious goals, but the plan should also be realistic by incorporating measures to meet your short-term needs and lifestyle.
For instance, if you do enjoy forms of entertainment like movies, concerts or social events, you should also ‘treat’ yourself and consider allocating a portion of your budget towards these forms of discretionary expenditure.
What are some healthy investing habits millennial investors should adopt?
It’s first important to have this realisation that investing is a marathon and not a sprint. Millennial investors living in the digital age may find this paradoxical, when they are used to getting everything quickly at the tip of their fingertips.
But investing is a different ball-game altogether and rewards the patient. As legendary investor Charlie Munger puts it, “It is waiting that helps you as an investor, and a lot of people just can’t stand to wait”.
For millennial investors just starting out in their investment journey, our advice is for them is to stay disciplined and stick to their investment plan regardless of how markets behave. Dollar-cost averaging is a simple yet effective technique to ease one’s way into the market over periodic intervals and helps reduce the impact of volatility in one’s investment.
Newer investors’ nerves can be easily rattled when faced with choppy market conditions and this may drive them to making impulsive decisions in their portfolio and selling too early. However, our advice is for them to stay invested and avoid timing the market.
Let the professional fund managers make adjustments to the portfolios when market conditions warrant them. For individual investors, you should stay focused on your goals and rebalance annually to correct any portfolio drifts that will ensure you are on track towards achieving your goals with a level of risk you are comfortable with.
What should a millennial’s ideal investment portfolio look like?
Time is on the side of millennial investors and they should make the most of this finite resource. Whilst some millennials may be wary of taking too much risk and getting jittery quickly, they should also realise they have a much longer investment horizon to recoup back losses and compound returns further.
Thus, if circumstances allow, a millennial investor’s portfolio should be tilted more aggressively towards capital growth via equities and growth funds. The remainder of the portfolio can be diversified through allocations in fixed income that can provide stability and consistent income with lower drawdowns when market conditions turn more volatile.
For tactical exposure which constitutes a smaller portion of the total portfolio, millennials can also seek exposure in more thematic and structural growth funds like China consumption or disruptive technology for example.
By Bernie Yeo
Please click here to read the full article in the digital edition of Smart Investor (April 2020 issue).
