Millennials, the demographic cohort born between 1981 and 1996, have been fortunate to witness the rise of the digital revolution that led to a plethora of opportunities across all industries. This generation begins and ends the day with technology. Hence, their investment decisions and financial wellness also revolve around the arena of technology. In fact, having experienced two major stock market crashes in their lifetime, these youngsters take a cautious approach to their investments.
Per a BlackRock (NYSE:BLK) survey in 2019, 65% of millennials choose to stash their earnings in cash savings accounts and nearly 85% consider themselves “conservative” when it came to risk tolerance. Talking about financial wellness, this generation is more attracted toward putting money on crypto currencies, tech stocks, environmental, social and governance (ESG) funds as well as venture capital funds.
Millennials’ Attraction/Inclination for Tech
This tech-savvy generation boosted the adoption and use of technology in several ways. From education to entertainment, buying groceries to remote working, millennials depend on technology to connect to friends and family, work and much more. Now with the pandemic forcing people to stay indoors, technology became the man’s best friend without any doubt. Per an eMarketer article, a June 2020 GlobalWebIndex report states that smartphone and laptop usage in the United States has surged 45% and 43%, respectively, since the coronavirus outbreak. Technology also helped millennials keep track of their expenses, save taxes, avail of instant credit and much more. This generation enjoys swiping to pay for services and use an array of digital applications to clear rents and manage multiple EMI payments or medical emergency costs. This is because automation, flexibility and instant results eliminated all tedious tasks and undue wastage of time and this made technology more attractive to this particular age group.
Further, the pandemic fueled a host of technological innovations that enabled several micro-cap companies to grow and invest in these platforms. In fact, the COVID-situation offered ample prospects for millennial investors.
Millennials’ Force ESG Revolution
Another factor that millennials consider for their financial wellness is ESG or Environmental, Social and Governance. ESG, a trending thematic investing in 2020, seems to have gained an overwhelming acceptance from millennials. In the next few decades, millennials are expected to inherit trillions of dollars in America alone, and this could change the investment landscape completely. Millennials focus on impact investment as they can get greater integration of money and value by investing in sustainable and impactful business models. This is already proven as during the pandemic when majority of the businesses bore the brunt of lockdowns and social distancing norms, these ESG-focused companies gained traction without fail. ESG issues like income inequality, diversity and inclusion, social injustice, employee welfare and climate change were addressed.
ESG funds have the ability to manage risks and create a long-term value, which attract millennials who are looking for long-term gains. iShares ESG MSCI USA Leaders ETF (SUSL) has advanced 32.3% since its launch in May 2019.
4 Funds to Buy
Millennials played a crucial role in impact investing and given the current trend, we selected four technology and ESF funds that flaunt a Zacks Mutual Fund Rank #1 (Strong Buy). Moreover, these funds have encouraging three and five-year returns. Additionally, the minimum initial investment is within $5000.
We expect these funds to outperform peers in the future. Remember, the goal of the Zacks Mutual Fund Rank is to guide investors to identify potential winners and losers. Unlike most fund-rating systems, the Zacks Mutual Fund Rank is not just focused on the fund’s past performance but also on its likely future success.
The question here is why should investors consider mutual funds? Reduced transaction costs and diversification of portfolio without several commission charges that are associated with stock purchases are primarily why one should be parking money in mutual funds (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).
Fidelity Select Software & IT Services Portfolio FSCSX aims for capital appreciation. The non-diversified fund invests majority of its assets in common stocks of companies engaged in research, design, production or distribution of products or processes that relate to software or information-based services.
This Zacks Sector – Tech product has a history of positive total returns for more than 10 years. Specifically, FSCSX has three and five-year returns of 26% and 23.6%, respectively. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
FSCSX has an annual expense ratio of 0.71% compared with the category average of 1.25%.
Franklin DynaTech Fund Advisor Class FDYZX aims for capital appreciation. The fund invests primarily in equity securities, especially common stocks of companies that the fund manager believes are leaders in innovation and take advantage of new technologies.
This Zacks Large Cap Growth product has a history of positive total returns for more than 10 years. Specifically, FDYZX has three and five-year returns of 24.3% and 22%, respectively. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
FDYZX has an annual expense ratio of 0.61% compared with the category average of 1.04%.
Calvert Equity Fund Class A CSIEX aims for growth of capital through investment in stocks, which offers opportunities for potential capital appreciation. The fund invests majority of its assets in common stocks of companies that rank among the top 1,000 U.S.-listed companies. NALFX invests in companies that contribute to a sustainable environment, and its top ESG stock holdings are Microsoft (NASDAQ:MSFT), Thermo Fisher Scientific (NYSE:TMO) and Google (NASDAQ:GOOGL).
This Zacks Large Cap Growth product has a history of positive total returns for more than 10 years. Specifically, CSIEX has three and five-year returns of 18.2% and 15%, respectively. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
CSIEX has an annual expense ratio of 0.99% compared with the category average of 1.04%.
New Alternatives Fund Class A NALFX seeks long-term capital growth with income as its secondary objective. It primarily invests in common stocks of companies and even in other equity securities, such as real estate investment trusts and American Depository Receipts. NALFX invests in companies that contribute to a sustainable environment and its top ESG stock holdings are Brookfield Renewable Energy, Terraform Power and Nextera Energy.
This Zacks sector – Other product has a history of positive total returns for more than 10 years. Specifically, NALFX has three and five-year returns of 17.9% and 17%, respectively. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
NALFX has an annual expense ratio of 1.08% compared with the category average of 1.28%.
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