Utilities Could Be The Millennial Retirement Fund

Investing in the stock market is not a foreign subject to millennials. In fact, millennials tend to be more involved in investing than previous generations.

A recent survey by Bankrate showed that only 29% of millennials consider volatility in the stock market as a serious reason not to invest. This is very different from generation X investors who felt that volatility was a huge risk to their savings.

For millennials, investing seems to be a trend that is not wearing off quickly. Stocks like Apple Inc. (Nasdaq : AAPL) and Alphabet Inc. (Nasdaq : GOOG) are heavily invested in by the millennial crowd. 

The survey also found that 33% of millennials preferred real estate investments when it came to investing money they did not plan to need for at least 10 years. The stock market was the second highest investment choice, with 23% of participants opting for becoming shareholders in large companies.

Investor's Business Daily says that millennials actually like high risk investments, rather than taking a more long term approach. The report states that millennials tend to invest in companies like Tesla, Inc. (Nasdaq : TSLA) and Advanced Micro Devices, Inc. (Nasdaq : AMD), while also opting for other tech stocks with a little less risk.

The reasoning behind these choices probably lies in the fact that millennials tend to want things in life as quickly as possible. While their parents and grandparents worked for decades in order to purchase a house, this generation has managed to build enough credit by the average age of just 36.

This fast paced movement is prevalent in nearly every aspect of life, with young millennials quickly climbing the corporate ladder at early ages. While taking a high risk approach to investing can possibly pay off, the more long term investment strategies often lead to greater reward.

One sector, often overlooked by millennial investors is the utilities sector. While COVID 19 initially caused utilities to take a huge hit as a whole, the sector bounced back and is healthy again. 

In the US, the average monthly cost of utilities is around $290 per month. In Canada, that number is closer to $325 per month. These utilities include things like water, electric and natural gas, which make them essential to our way of life.

Immigrants to both countries provide new clientele for the utilities sector, making it an ever growing investment opportunity. The cost of utilities is an important factor to consider when immigrating to a new country. Investing in the companies that supply them is a wise addition to any portfolio of investments.

Many of the companies in the utilities sector that took hits to their stock prices during the pandemic have climbed back into normal trading territory and even managed to be profitable last year. Take a look at the examples of this below.

Xcel Energy Inc. (Nasdaq : XCEL) stock dipped as low as $58.86 on October 10th of last year. However, it is now trading at $71.27 at the time of writing. Over the course of 2022 the stock managed an overall positive performance of +5%.

Another high performer was American Electric Power Company, Inc. (Nasdaq : AEP). This company was trading at just $65.86 five years ago. At the moment, shares are valued at $94.84. In spite of a dip in price during the pandemic to $74.85 in February of 2021, the stock rebounded. Last year it increased +8%.

Consolidated Edison, Inc (NYSE : ED) turned a profit of +13% last year. The AES Corporation (NYSE : AES) managed an increase of 19%. These are excellent returns considering the overall unstable conditions the economy was experiencing at the time.

Perhaps the two most incredible returns, according to ValueWalk, were PG&E Corporation (NYSE : PCG) and Constellation Energy Corporation (Nasdaq : CEG). They returned a whopping +35% and +107% respectively.

The utilities sector can be a nice place to start a nest egg investment. However, if investors select the right stock, we can see that the returns can be astronomically high.

While millennials may be interested in flashy gadgets and the stocks that back them up, they could be missing out on some of the best investments on the market today. Utilities are a group of stocks that provide services and products we must have in order to maintain our way of life. 

This equates to constant demand for whatever supply is available. More people are purchasing homes in new housing developments, which means more infrastructure is needed to support those homes. The utilities companies that provide that infrastructure have a never ending revenue stream from their clients.

Purchasing stock in a company that has a continuous stream of income that is not in danger of being cut off any time in the foreseeable future makes sense. Investing in Tesla is attractive, but why not invest in the company that makes it possible for someone to drive a Tesla in the first place?

These companies will be supplying the power for the massive public charging stations that are soon to be seen all across the country. The utilities stocks may not be as mainstream as the big tech companies, but they are definitely excellent earners and can be a source of income for years to come.

An investment wisely made in the utilities sector today, could become the retirement fund of tomorrow.