Millennials Embracing Passive Investing & Vanguard

I must confess – I’ve dumped on millennials quite a bit.




First, I made fun of them for boomeranging back to their parent’s basements. Say hi to the “rents” for me, guys (hehe).

Then, I reminded them that their credit sucks.

I also poked at them for being on the wrong end of the credit card versus debit card debate.

Then, I tried to convince them that they are scaredy-pants investors, that cash is not king, and that they were squandering the opportunity to harness the power of compound invest returns, and they have to take some risks and start investing or inflation will render their measly savings useless.

And most recently notified them that they (alarmingly) have a negative personal savings rate. This one stung a little – personal savings rate is my favorite personal finance metric and having a negative one is not going to cut it.

Why must I do this? Partly because I can – I’m a borderline millennial, so I’m protected from being labeled a generationalist bigot. Secondly, this is a blog that is primarily aimed at millennials by virtue of its name. And finally – millennials need a little kick in the ass now and then when it comes to personal finance (and most things), and because I’m also borderline Gen X, I can summon enough brutal honesty to offer it. But – I only do it because I care. <insert canned studio audience “awwwww”>




With all this harsh reality to tear millennials down, maybe a little building up is overdue? I just missed flowers and candy for Valentine’s, so metric-driven financial data will have to do…

According to research from Vanguard on investors, by generation, millennials are gaining ground. While not as many millennials have Vanguard IRA accounts versus their older generations, they are catching up at an increasingly faster rate:

millennial investing

A higher open rate was to be expected – but that much higher AND growing at that pace? Impressive. I love Vanguard for their low costs and passive investing options and it appears that I’m definitely not alone amongst my age group. Millennials are looking beyond the flash and seeing the substance.

More importantly, for those who have a Vanguard IRA, millennials are kicking ass versus Gen X and Boomers in actually contributing to one.

millennial IRA contributors

Wow, more than double the participation rate of older generations? Impressive!

And finally, millennials are on track for the ultimate bottom line payoff – bigger (projected) balances in retirement.

millennial IRA balances

Apparently, this trend is not limited to or felt by just Vanguard. Wealthfront and Betterment, both with automated passive investing strategies, are growing at very fast rates, both with over $1 billion in assets under management. Guess who both companies are targeted at.

What does all of this mean?

For starters, the limited millennials that are choosing to invest are choosing wisely. At least we’ve got that going for us, which is nice. Now, we just need to boost the number of millennials that choose to invest.

Second, our ability to contribute to and seek out passive and automated investment strategies is being recognized by the financial industry. That is only going to open the door for more attention and investment options in the future. Already, Charles Schwab and Vanguard are planning to join Wealthfront, Betterment, and other upstarts in the robo investment (automated re-balancing) game. I cannot wait!

Third – imagine how much wealth we could be collectively building if we actually did have respectable personal savings rates! While some of us have proven to be more fortunate than others, there is a rather significant portion of us who are still stuck in debt-building land. Part of this is our own doing. Another part of this is that wage growth is stagnant and inequality in wages is increasing. With the haves (investing) and have-nots (paying off debt), the gap in wealth will only further increase in the years to come. That’s not a good thing for this country.

Oops, lets end this on a positive note… yay, Millennials!

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6 Comments

  1. Steve
    • Garrett
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