When it comes to choosing investment products, millennials
are largely passive and far more likely to go with what their employers offer,
such as 401(k) plans with mutual funds and life insurance, than independently
set up investment strategies. A survey released Tuesday by iQuantifi, in
partnership with Middle Tennessee State University’s Jones College of Business,
recently asked 500 Americans between the ages of 21 and 35 what investment
products they currently own and which they’re planning to use in the future.
Almost half (47 percent) said they owned life insurance,
while about a third owned mutual funds and stocks. Far fewer millennials said
they currently owned any exchange traded funds (13 percent) or index funds (11
percent). And when asked if they planned to use ETFs or index funds in the
future, only about 14 percent said yes.
Katie Brewer, a financial coach with Your Richest
Life, says life insurance, mutual funds and stocks are more widely known
because they are the ones that are sold more often. Roberge adds that the lack
of financial education is also playing into these choices, as many millennials
may encounter investment products like mutual funds early on because of the
wide public advertising campaigns “They may not even know anything about other
investments (i.e. exchange traded funds),” he says.
That’s not to say that mutual funds are a poor investment
choice. These are actually the ideal mutual funds for young professionals just
starting out on the road to building wealth. And yet a Roth IRA with low cost index ETFs
that track the broad market are the exact type of investment vehicles Marcio
Silveira, founder of Pavlov Financial Planning, says also should be high
in the millennials’ priority lists.
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