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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.

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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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squirrel hammer
squirrel hammer
4 months ago

Jim, since you’re a fan of new words, you might find the story of the origin of ‘hodl’ entertaining. From coindesk.com:

On a December morning in 2013, user GameKyuubi posted an entry titled “I AM HODLING” in a bitcoin forum. “I type d that tyitle twice because I knew it was wrong the first time,” he wrote in the first sentence of a drunken post loaded with typos and phrases in all caps.

The misspelling caught on and is used in the bitcoin community to represent holding long term vs. trading. The ‘hold on for dear life’ interpretation came later.

CJ
CJ
4 months ago

“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.”

Love your articles, (thank you!) but gotta disagree on student debt. No one has to go into that much debt. Community colleges are the best bargain going, w/guaranteed transfer to an in-state 4 year.

But most kids and their parents turn up their nose at that & want a “name” school & the full “college” experience. Fine. Then they want me and other taxpayers to foot the bill by canceling their loans?

I went to community college and worked to earn tuition money while doing so. Didn’t borrow a dime. And paid $40-50 or more for every textbook. Texts weren’t online, no used books, etc.

I could only dream of the job market today’s grads have. I was a gen x: job competition was brutal, as boomers were still working their way up and it was an employer’s market.

I do agree on the rent and housing though…those are out of control.

Last edited 4 months ago by CJ
Martin McCue
Martin McCue
4 months ago

(I thought stonks was a mashup of stocks and stinks. Not nihilism as much as fatalism about the world that is being left to them.)

No matter. Millennial investors probably still break down into a wide variety of subgenres, from conservative savers to speculative hope-to-get-rich-quick gamblers, with everything in between. Just like boomers. The jargon may be different, but the basic rules of investing, like ‘time value of money’, compounding, economic cycles and risk don’t change very much. (I do notice somewhat less interest in diversification, but sometimes one needs to learn that lesson the hard way, when a sure thing turns out not to be one.)

Philip Stein
Philip Stein
4 months ago

While attitudes about investing may shift from generation to generation, the basic principles underlying sound investment practice don’t change.

It’s irrelevant that millennials show a strong preference for exchanged-traded funds. What is relevant is that they invest some portion of their savings in stocks at minimal cost regardless of the vehicle they choose.

Every generation has major issues to deal with. Of course, homes priced out of reach and crushing student debt are significant challenges. But that doesn’t mean earlier generations had it easy. As Dick Quinn points out, millennials haven’t had to deal with the Great Depression, World War II, presidential assassination, or the Arab oil embargo.

“The financial world’s vicissitudes also belie the idea of a portfolio destined for sure and steady growth.” No kidding. When has any generation had access to portfolios destined for sure and steady growth? All any generation can do is build balanced portfolios and hope the market rewards them.

Finally, are those millennials adopting the acronym HODL the same ones putting their money into speculative investments? I can’t imagine anyone investing for the long-term in broad market index funds shouting “hold on for dear life.”

Nate Allen
Nate Allen
4 months ago

A whole article on stonks and no mention of WallStreetBets? (the famous…or infamous….subreddit)

It might be an interesting aside for anyone wanting to learn lots of new terms. (financial and otherwise)
Note: not for the faint of heart or those who are easily offended by language.

R Quinn
R Quinn
4 months ago

Well I’ve learned a few new words, who knew, I’m still trying to deal with wonk.

From my perspective based on the info you related I see a lot of complaining by the 1980 + folks and a lack of appreciation for what previous generations coped with. It sure isn’t like there weren’t many crisis and tough times in the last hundred years or so.

It isn’t like many of us grew up in tiny apartments and not houses 1000 plus sf larger than our grandparents.

Charles Scwaub went from a magnificent mansion to a one bedroom apartment during a financial crisis and rebounded.

It’s a different reality just like every generation faced a different reality. It’s also a generation with immense new and different opportunities.

Student debt was an investment, a choice, a road to increased opportunity, my grandfather who went work after 8th grade would have liked that burden. Instead of nine years night school paid in large part by VA benefits, I might have liked that choice.

By the way, how many of these Millennials had their lives interrupted by a two year military draft? Can you imagine trying to reinstitute required military service in the Country today?

I don’t doubt the info you related, Jim, but I can’t get passed the feeling we have a generation of complainers with entitlement attitude thinking only they have faced tough times.

Richard Gore
Richard Gore
4 months ago
Reply to  R Quinn

It is easy to despair about the fate of our country, but it isn’t a generational issue to me. I taught higher ed for many years and was generally impressed by the competence and work ethic of my students. They were at least equal to my generation (boomer).

No, for me, the issue is how so many people can continue to support our most recent former president who tried to destroyed democracy itself.

Jim Wasserman
Jim Wasserman
4 months ago
Reply to  R Quinn

Thank, Dick. I appreciate the different perspective. I think that, when it comes to perceiving a different group of people, by location, beliefs, or age, it’s like the blind men and the elephant. It depends on what part you inspect and how much of the total you get to examine (and that’s just the elephant’s physical build, not its temperament). I tell the same thing to young folks who tell me what all of us boomers are like (and always were like, as if we have never changed). If I’m feeling teacher-y, I use that to discuss sampling errors. Be well.

Last edited 4 months ago by Jim Wasserman
R Quinn
R Quinn
4 months ago
Reply to  Jim Wasserman

Do you really feel Millennials have worse challenges and less opportunity than generations that faced world wars, a depression, stock market collapse, double digit inflation, gas rationing and standards of living that they would laugh at today?

John Goodell
John Goodell
4 months ago
Reply to  R Quinn

We faced two wars simultaneously for nearly two decades and entered the workforce with few jobs and delayed wealth compounding during the worst financial crisis since the Great Depression, had our prime working years interrupted by a two year pandemic, and current inflation is, well, currently happening.

I have no problem with some in an older generation burning draft cards and accepting the consequences for a war they deemed immoral just as there have been hundreds of thousands (millions?) of millennial and GenZ folks who volunteered during two long wars. Each generation faces its issues, or put another way, “The good old days weren’t always so good and tomorrow ain’t as bad as it seems.” -Boomer Joel

Last edited 4 months ago by John Goodell
R Quinn
R Quinn
4 months ago
Reply to  John Goodell

Yes, there are challenges for each generation and different opportunities as well. I just happen to think that those moaning about any number of things they feel unfair, too hard, too expensive, etc. should at least consider what other generations had to deal with. We just didn’t go through the first pandemic or come out worse than previously this time. Inflation and gas prices are already modestly starting to decline.

It’s the simple things that often escape us. Today you can turn on the heat and ac in your house from miles away on your phone and poof it’s warm or cool when you get home. I shoveled coal.

parkslope
parkslope
4 months ago
Reply to  R Quinn

Could it be that social media gives us the false impression that today’s younger generations complain more about their circumstances?

My grandmother traveled by herself from Missouri to the Dakota Territories to homestead when she was 18. I’m sure she would have laughed at anyone who complained about shoveling coal.

Edmund Marsh
Edmund Marsh
4 months ago
Reply to  R Quinn

Perhaps a step back from this perennial argument would give a better perspective. Maybe all humans just have a tendency toward discontentment with our own lot, and think that someone else has it better (or worse), whether it is true or not.

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