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Buy and Hodl

Jim Wasserman

I’M A FAN OF SLANG and newly coined words. Think of all the names for money we’ve had over the years, like cheese, clams and cabbage. New words catch on not only because they allow a new generation to put their stamp on the world, but also the words reflect changing attitudes.

That brings me to “stonks,” the name many millennials use for stocks—and one that reflects a different view of investing. No one’s sure where the word originated. It’s not related to stonk, which is military slang for an artillery bombardment. The term seems to have been first launched into the millennial mindset with a 2017 meme. It’s thought to be a playful, perhaps ironic, misspelling of “stocks,” in line with other intentional mispronounciations that millennials have adopted, like HODL—short for hold on for dear life—which is often used to describe long-term cryptocurrency investors.

Why the need to use a new word for stocks? In my research, I’ve been interviewing millennials and members of Gen Z, the two generations born since 1980. Speaking with these new investors reveals a change in attitude toward money, one that hints at playful nihilism.

As a baby boomer who started investing in the 1980s, I was taught to build a portfolio with a core of solid, slow-growth stocks, such as IBM or JCPenney. Then we’d add what were then experimental risky stocks, such as those new unknowns often found on the Nasdaq, like Apple or Microsoft. Our portfolios steadily grew in value, interrupted only by blips like the 1987 crash. The best strategy was to be a tortoise, not a hare. Slow and steady wins the race.

Then things seemed to get wonky. Fringe technology startups like the FAANG stocks turned into bedrock growth companies. Bubbles and financial crises, such as 1997 and 2007-09, made the smooth ride more of a rollercoaster. Previously sound sectors no longer seemed like safe bets—witness the housing bust that began in mid-2006.

Today, millennials confront a changed landscape. They hear tales of prior generations starting with a tiny bungalow starter home and then moving up. They face a median income-to-housing-cost ratio so bad that it’s harder to buy a house today than it was during the Great Depression.

Boomers tell millennials to cut back on avocado toast, as if saving a few dollars could offset an average of almost $40,000 in student loans or pay for skyrocketing rents. It’s a new reality, and millennials have adopted new attitudes and new strategies to compensate.

Not surprisingly, they take boomers’ admonitions with a grain of salt. Many times, workers have a better chance of an increased salary if they move to a new company rather than staying in one place, as we boomers often advise. Meanwhile, contrary to older folks’ perceptions, millennial ways are often cheaper, such as using ridesharing rather than owning a car.

The financial world’s vicissitudes also belie the idea of a portfolio destined for sure and steady growth. Millennials now expect the unexpected and know that today’s “can’t miss” idea may crash tomorrow. Got a great stock tip that turns out to be a dud? Throw up your hands and cry, “Stonks!” Elon Musk offers $54 per share for Twitter and yet the stock trades far lower? “Stonks!” So what if you’re seriously financially invested? That doesn’t mean you have to get seriously emotionally invested.

Of course, some old ways still work, and millennials know that. Despite media accounts playing up millennial frivolity, they’re contributing more to 401(k)s than five years ago. They also like well-balanced portfolios, though—like many people—they prefer to let others do the balancing, hence the popularity of target-date retirement funds.

In addition, millennials show a strong preference for exchange-traded funds, more so than prior generations. A big reason is the lower costs, perhaps allowing them to afford their avocado toast. Even this year, with high market volatility and accelerating inflation, younger investors are much more likely than older generations to say they’ll invest more.

It’s a different race to financial security today. The course has changed since we oldsters ran it. There are new, unexpected hazards. To us turtles, the millennials look like hares, zooming ahead and laughing at our plodding advice. But make no mistake: Just as we heard our parents’ advice, they hear us. But will they heed what we say? Only if it makes sense for the changed world that confronts them.

Jim Wasserman is a former business litigation attorney who taught economics and humanities for 20 years. He’s the author of a three-book series on how to teach elementary, middle and high school students about behavioral economics and media literacy. He’s also authored several educational children’s books. Jim lives in Texas with his wife and fellow HumbleDollar contributor, Jiab. They have a book that examines the impact of social media influencers on youth consumerism and identity development coming out in 2023. Check out Jim’s earlier articles.

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