Apple Inc. (NASDAQ:AAPL) and Tesla Motors Inc (NASDAQ:TSLA) are two of the hottest companies on Wall Street, but are they good investments? One author says Millenials may not be taking into account stock valuations when deciding which companies to invest in.
Millenials slow to invest
Millenial Money author Patrick O’Shaughnessy said Millenials are finally starting to invest in the stock market, but their picks aren’t always the greatest. He said they want to invest in the things they know about, which often involve technology stocks like Apple and Tesla.
In an article posted on Yahoo! Finance, Shawna Ohm said O’Shaughnessy noted that younger investors tend to like tech stocks. O’Shaughnessy said on the one hand, he’s glad Millenials are starting to become interested in the stock market. However, on the other, he thinks they’re “getting interested in the wrong kinds of stocks.”
Apple, Tesla are socially popular
Millenials tend to be focused on the social aspect of their lives. They’re usually very socially conscious, which O’Shaughnessy said can have a negative impact on their investment decisions. They target “good” companies like Apple and Tesla. However, he said they often fail to see what makes companies a good investment in addition to being a good company.
The author said it’s only natural to want to invest in companies they know about that make products they use and that have CEOs who are on the covers of magazines. They also want to invest in exciting new companies like Tesla because it gets them involved in those companies.
Where Millenials should invest
However, he said the issue is that often these stocks “aren’t always priced right.” So he said that while Tesla and Alibaba Group Holding Ltd (NYSE:BABA) are both companies, they don’t necessarily make great stocks to invest in. He thinks that technology is the key for fund managers and companies that want to draw in the younger investment crowd. But it will require them to get creative.
“I think the key for us will be to get us through automation and through mobile,” O’Shaughnessy said.
Some suggestions he made of investment firms that are already doing this are Wealthfront, Vanguard and Charles Schwab Corp (NYSE:SCHW).
Interestingly, this week Fidelity Labs unveiled its 3D investment tool StockCity, which is designed for the Oculus Rift virtual reality platform. If the author is right about the importance of combing technology with investing to get the attention of Millenials, it’s possible that this tool might draw some younger investors in.