Money managing app Plum has released data from its 1 million-strong community that shows millennial investors have been following the thesis of investment guru Warren Buffett to “invest in what they know”. Millennials have been making considered, logical investment choices during the COVID-19 pandemic and have adapted quickly to the crisis, investing in places that are a good fit for the new norm.
Plum’s app is a complete solution that helps customers build wealth by learning about their spending habits and automating actions for each individual user. Deposits into Plum grew steeply in general in the first half of 2020, increasing five times over between January and May as people spent less and saved more during the Covid-19 lockdown. However it was the company’s investment offering that saw the largest surge, with an 180% increase in investors using the platform this year to date (Jan-Sept 2020).
The new analysis looks into investor behaviour during the crisis to map significant changes. For the findings, Plum has looked into the behaviour of the customers that use its platform to invest in 10 hand-picked funds over the past year. Millennials aged between 25 and 35 make up the majority of Plum users, with the average investor age being 33. As a new lockdown approaches, the patterns of the first half of the year may indicate what lies ahead in terms of investor behaviour among this impactful age group.
Plum’s data shows that The Medic, Plum’s health fund which covers international health and pharmaceutical companies, doubled in size in January. This fund was previously an unpopular choice, with just a small number of investors. This could be an early sign of an investor response to the developing global pandemic, which was already having a huge impact in Asian countries at the time.
Victor Trokoudes, CEO & co-founder at Plum, said: “Millennials are often named as the generation of no income, no job, no assets. Our data proves that for our investors at least, this stereotype is incorrect, as they have shown themselves to be savvy with their smart investment tactics during the Coronavirus pandemic. In fact, it looks like our customers took lessons from Warren Buffett. They invested in things they know well, like technology, and were able to adapt quickly to events around them by investing more in our health fund. It will be really interesting to track what our investors do next, as we enter the next phase of the pandemic response.”
As the first quarter of the year progressed, there were some notable changes to investment patterns as the COVID-19 crisis started to spread across Europe and cause country-wide lockdowns. In February 2020 there was an increase in the allocation of Plum’s Tech fund (Tech Giants) of +6% while the Growth fund (Growth Stack) dropped by -3%. Meanwhile, the allocation for The Medic against the Growth Stack increased further with the first confirmed COVID-19 death in Europe.
A sensible investment
Overall, where we might have expected to see less funds invested due to global uncertainty, millennials actually invested more than ever during the darkest days of the Coronavirus pandemic. This was not an impulsive decision as their choice of funds shows that they made sensible choices to ensure they did not suffer from the market turbulence.
During March and April, Plum saw that the amount invested in The Medic fund, growing by 50% against the Tech fund, Tech Giants, which dropped down by -5%. March and April was the period of most severe lockdown in the UK, so this shows the investor reaction where they chose an industry that has become more visible and crucial during a global pandemic.
However, as lockdown eased, The Medic stabilized, and by May, the Tech Giants fund started to grow in assets again. From May onwards, Tech Giants grew the fastest when compared with the other funds, seeing an increase from 42% to 53%. After lockdown, the Growth Stack and The Medic dropped from 13% – 9% and from 11% to 7% respectively.
The company’s data shows that by September 2020, the Tech Giants fund has almost 60% of monthly investment amount per Plum fund, with 40% divided between the remaining nine funds. Fund allocation is back to a similar level as the one seen prior to COVID-19, with Tech Giants leading the way. This shows that millennials went back to what they know best by the end of lockdown. Tech Giants, where people invest in the world’s most innovative companies like Apple and Google, has been a popular choice for millennial investors, as these are digital natives who grew up with the internet and consider tech companies to be a good place to invest.
Thanos Bismpigiannis, Head of Product at Plum said: “We’ve experienced rapid growth over the past year as more people choose to invest through Plum. Spending dropped during the COVID-19 lockdown, and when people saved more automatically, they then trusted Plum to help them grow that money. Both the number of investment orders as well as the value invested with Plum has more than doubled since March. It’s the simplicity of our intuitive investment platform that empowers our customers to make choices that make them better off over their lifetime. We plan to further expand our investment offering with new products and investment opportunities to help more people save and invest in ways that fit their personal financial needs and risk appetite.”