During the first quarter, millennial investors suddenly had to navigate extraordinary market volatility, resulting from uncertainty around the coronavirus pandemic. For most, this was the first economic crisis of their adult lives.
Apex Clearing — a custody and clearing engine whose clients include Betterment, MoneyLion and SoFi — examined the top 100 stocks owned as of March 31 by some 960,000 investors, whose average age was 31, to find patterns in their investing behavior during a time of crisis.
The analysis found that younger investors’ top 10 holdings were unchanged from the fourth quarter and represented 52% of the Apex Millennial 100.
Although the top 10 stocks were down approximately 5%, on average, for the January-to-March period, they dramatically outperformed broader market measures — the S&P 500 Index declined roughly 20% in the first quarter.
Big technology-focused companies dominated the top 10 holdings. Tesla, No. 3 in the top, 10 advanced 25%; Amazon, No. 2, was up 6%; and No. 8 Netflix gained 16%.
“Despite the intimidating market swings over the past quarter, millennials continue to show an incredible amount of faith in the stocks that have been a key part of their investment strategy since we began this analysis,” Apex Clearing CEO Bill Capuzzi said in a statement.
“Following a buy-and-hold approach for their core investments has helped them navigate the volatility in the market and their lives in the wake of COVID-19, even as they boldly pursue opportunistic investments in new areas.”
Buying the Dip
Another theme that turned up in the analysis was millennials’ bullishness on travel stocks.
Investors took advantage of buying major airlines on the dip even as the airline industry faced eye-watering losses of $250 billion or more as various lockdown measures carry deeper into the second and third quarters.
Delta and United, which were previously unranked, popped up in the No. 21 and No. 57 spots in the Apex Millennial 100, while American Airlines moved up 30 spots to No. 46 and Southwest climbed 10 positions to No. 88.
The coronavirus outbreak has also savaged the cruise industry, another sector where millennials made significant moves. Carnival, at No. 38; Royal Caribbean, No. 54; and Norwegian, No. 71, were all new additions to the top 100 last quarter.
In fact, the analysis showed that cruise stocks had the largest percentage increase in number of positions and quantity of shares held of any industry.
Health care companies that are closely linked to treatments and other services related to COVID-19 also garnered interest from millennial investors, according to the analysis.
One approach to treatment involves antiviral drugs, dozens of which are in various stages of development, according to Apex. A drug from Gilead is currently furthest along — and millennials took note, with the company making a big quarter-over-quarter jump from No. 91 to 45.
“Our Q1 2020 report helps validate that millennial investors are patient and strategic when they find themselves in bear market territory,” Hannah Shaw Grove, chief marketing officer of Apex Clearing, said in the statement.
Apex Clearing also looked at more than 7.5 million self-directed and robo-advised accounts that custody with the firm as of March 31.
New accounts increased at a record rate in March across each generation, the analysis showed. New self-directed accounts were up 83% month-over-month and up 308% over the 2019 monthly average, while new robo accounts increased by 29% and 279%.
“Beyond our Millennial 100 data, we saw investors of all ages flock to digital platforms to take advantage of the volatility, which drove a huge spike in new account openings,” Capuzzi said. He noted that activity was facilitated by Apex’s family of APIs that makes it simple for investors to open and fund eligible accounts.
Online investors are actively trading in volatility, according to the analysis. Trades per account were up across the board with self-directed investors driving the majority of the increase.
Apex processed upward of 27 million trades in self-directed accounts in March — a more than 100% increase over the 2019 monthly average.
The number of trades in millennial accounts increased by 55.5% month over month, compared with a 45.9% increase in Gen X accounts and a 31.7% increase in boomer accounts.
This indicated, Apex said, that younger investors were reacting more strongly to the market volatility.
The analysis also found a pronounced increase in cash positions across generational segments. As of March 31, Gen X investors had the highest percentage allocated to cash at 14.6%, followed by boomers with 12.4% and millennials at 4.8%.