Most millennials – people in their 20s and 30s – have avoided the stock markets. Why?
They might hesitate to stake their futures on the same market that crashed as they grew up. Or they’re swamped with years’ worth of debt. With more than 45 million people owing on student loans, most young adults don’t know if they’ll ever shake off debt. And many don’t have a retirement portfolio. Without it, how can they possibly compete in the stock market, which has generally been the domain of accredited investors – people with more than a million dollars in liquid assets, or those earning more than 200K a year?
So it came as a surprise when TD Ameritrade recently revealed that 72% more millennials opened investment accounts with the company over the past year.
It’s not an isolated occurrence. Millennials are suddenly making an impact on the market. What is attracting them, and how do they jump the hurdles to get in?
Main Attractions: Two Budding Industries
Cannabis legalization is on a roll. And cryptocurrency has seen unprecedented growth in the past year. Millennials are fascinated. And many are decidedly supportive of both cannabis and digital currencies.
Of all age groups, young adults show the most enthusiasm for investments in ideas they believe in. This is, after all, the crowdfunding generation. And they can get behind cannabis. Although support for legal weed is growing in all age groups, young adults are the main drivers of the social shift.
And Wall Street, take note: almost a third of millennials would invest $1,000 in Bitcoin rather than stocks or bonds. Why do young people have such faith in digital currency? For one, it’s just that: digital. It’s peer-to-peer. No bureaucracy in the middle. It’s new, it’s timely, it’s trendy and fun. Investments can happen in a flash on a phone with apps like Robinhood and Coinbase.
Both classes of assets are volatile. Surges in buying and selling can put investors on a rollercoaster. To people who are just learning to invest, there’s a thrill in being part of the action, and this is undoubtedly part of what draws millennials in. Those with little to lose and much to gain welcome the risk.
Clearing the Hurdles
Millennials have adopted a number of alternative investment strategies. Consider micro-investing, a mode of investment that makes perfect sense to people who have grown up with smartphones. The Acorns app even enables retirement funding. It makes the whole process of investing hands-on and interesting. It’s free for four years to college students. So millennials are not only getting their feet wet in asset management; they’re learning it for the long game. They’re young, they represent the country’s largest economic demographic, and in the aggregate, they’re transforming the investment landscape.
How are they entering the cannabis sector? They look to exchange traded funds (ETFs), currently offered by Horizons Marijuana Life Sciences or Alternative Harvest. And there’s Fundanna.com, the equity crowdfunding trailblazer for cannabis, which enables an investor to jump in with just $100. Fundanna is also educating its new investors, making the risks clear and understandable.
Learning the Ropes
Vice interviewed young investor Abdul Osman, who encountered cannabis penny stocks just as governments started making adult-use pot legal. Osman observes that with cannabis, everyone is “starting the race at the same time.” Osman focuses on infused products, which people can’t grow and will want to buy. Not a bad strategy. Consider the success of Mirth Provisions, the purveyor of “delicious, cannabis-infused tonics” that raised $1.8 million from subscribers of the Arcview Group, a cannabis investment hub with a carefully curated menu of startups.
In the same way, because bitcoin and other digital currencies have only recently entered the scene, the cash-strapped have a shot at sharing their success along with the wealthy. New investors in both asset classes believe small investments could pan out extremely well for those willing to put some time in to learn about the industries.
Discussing the potential of individual cannabis investors, Arcview sales VP William Petruski notes: “Never before have we seen a multibillion industry, with a 30% compound annual growth rate, where federal law forces the big boys to sit on the sidelines.”
Legal and Regulatory Change
In early 2018, Attorney General Jeff Sessions reversed an Obama-era policy allowing the states to apply their own marijuana laws. A poll then showed 70% of voters opposing a federal crackdown. Meanwhile, Canada is legalizing adult-use cannabis, effective in the summer. The writing’s on the wall.
Colorado’s legal adult-use sector is a multi-billion dollar industry. California’s is poised to grow even faster. Recreational use is now legal in multiple states and the District of Columbia. Most states allow medical marijuana.
Despite the phenomenal growth of the cannabis sector and its satellite industries, the substance itself remains in a class of prohibited drugs under U.S. federal law. Thus, the federally insured banks have indeed been watching from the sidelines.
Cannabis, Meet Cryptocurrency
Peer-to-peer currencies could become essential for financing the fledgling legal cannabis industry in North America. And that would be fitting. The big stories in finance today are cannabis and cryptocurrencies. And as TD Ameritrade’s CEO Tim Hockey stated in early 2018, “the transformative nature of what blockchain can do is only just starting to be understood by the majority of the world.”
And as for cannabis stocks, William Petruski of the Arcview Group notes how the bold investors – hip to a trend that’s now practically irreversible – have found remarkable opportunity.
The millennials are not only hip to it. Today, they’re setting the pace.
Note: This article provides a general overview of investment trends related to the retail cryptocurrency market and cannabis-related stocks. It constitutes neither legal advice nor financial planning advice. As with all capital investments, cannabis and cryptocurrency investments warrant a careful study of a range of expert information prior to purchase. In a changing regulatory environment, investments have special inherent risks as well as growth potential.
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