2 reasons why millennials could be the best investors

Here are 2 reasons why millennials could be the best investing generation.

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There's nothing more fun at a Christmas dinner or New Year's Eve party than talking about which generation is best. So, in this article I'm going to stick up for the millennial investors.

Generating the best investment returns isn't based on who's the smartest or who's the richest.

A lot of people try to beat the market but are unable to do so. They may choose the wrong investments, perhaps at the wrong time/valuation, or they don't hold the investment for the right amount of time.

According to Blackrock, the world's largest exchange-traded fund (ETF) issuer, only 27% of baby boomers are invested in ETFs, compared to 42% of millennials and 29% of Generation X. So, reason one for why millennials may be the best investors: They invest in ETFs the most.

There are several reasons why owning more ETFs like iShares S&P 500 ETF (ASX: IVV) would help millennials beat boomers. Going for ETFs means they're probably achieving market returns – the average return usually beats most investment professionals over the short-term and long-term.

ETFs also usually come with low management fees. This means that the net returns millennials are receiving are even greater than the net returns of baby boomers.

Finally, most people just buy and hold ETFs for the long-term like Vanguard US Total Market Shares Index ETF (ASX: VTS) and Vanguard Australian Share ETF (ASX: VAS). That cuts out a lot of brokerage costs of buying & selling, further boosting the millennial net return score.

The other reason why I think millennial returns may be beating baby boomers is that they're investing in what they know, such as technology – they are willing to invest in 'riskier' growth businesses.

For example, millennials are big users of (Google) Alphabet, Netflix, Apple, Facebook, Afterpay Touch Group Ltd (ASX: APT) and Xero Limited (ASX: XRO). These businesses also happen to have produced excellent investment returns over the past two years. They have certainly proven to be better investments than boomer favourites Telstra Corporation Ltd (ASX: TLS) and Commonwealth Bank of Australia (ASX: CBA).

A lot of the old-school businesses are being disrupted. It seems the best long-term way to do well with shares is either invest in the disruptors like Altium Limited (ASX: ALU) or choose diverse portfolios through low-cost ETFs like Vanguard MSCI Index International Shares ETF (ASX: VGS).

Motley Fool contributor Tristan Harrison owns shares of Altium. The Motley Fool Australia owns shares of and has recommended Telstra Limited. The Motley Fool Australia owns shares of AFTERPAY T FPO, Altium, and Xero. The Motley Fool Australia has recommended Vanguard MSCI Index International Shares ETF. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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