Do youngsters these days spend all their money on espressos and Gucci? Survey says that, well, not really. A report1 published by consumer financial services company Bankrate showed that young people are putting quite a bit of money into investments and are getting very active in the stock market.

Despite market uncertainties earlier this year, Gen Z pulled far ahead of other generations in trading stock investments. Gen Z, it seems, moved on quickly from the summer romance of meme stocks and market bubbles towards a full-fledged love affair with stock investments.

What the Data Says

Persistent inflation and interest rate hikes rocked financial markets in the first half of 2023. While the fear of stock losses permeated the market, no generation was as concerned with their stocks as Gen Z. Bankrate’s report indicated that, during the period, 87% of American Gen Z investors took some form of action with their stock portfolio—a wide margin compared to just 68% of millennials, 38% of Gen X, and only 35% of baby boomer investors.

The enthusiasm does not stop there. Though Bankrate found that only about a quarter of all American investors intend to put more money into stocks, about 53% of Gen Z investors intended to increase their holdings. The average was in fact largely dragged down by Gen X and baby boomers where only 19% and 9% of investors intended to put more money in stocks, respectively.

Why the Frenzy?

There are some important reasons why Gen Z became the most active generation when it comes to investing. The proliferation of investing-oriented social media channels2, for one, made relevant information far easier to access. 

According to a recent study3 by the non-profit CFA Institute, social media is a leading source of investment education for Gen Z. Almost half, or 48%, of American Gen Z investors use social media platforms to learn about investing. It also ranked highly in Canada, the UK, and even China.

Another cited reason is “FOMO” or “Fear of Missing Out”. About 41% of US Gen Z investors and up to 60% of their Chinese counterparts did not want to miss out on the opportunities, maybe even egged on by friends who already made returns. In a way, this created a snowball effect where friends and acquaintances became crucial movers in stock investing. 

CFA Institute’s report also highlighted the spread of stock investment apps, which made investing a far easier process4; and the rise of cryptocurrencies, which proved popular among younger investors.

Will the Gains Last?

Young investors are undoubtedly having the time of their lives with the stock market with youth trying to get started with investments as soon as possible. CFA Institute found that 82% of US Gen Z investors began to do so before they turned 21.

Still, there are some inherent challenges for the Gen Z cohort. Despite the seemingly endless optimism, CFA Institute noted that money problems remained a common barrier for Gen Zs to invest. And even though more investment material is accessible on social media, lack of knowledge remains widespread with more than 50% of the demographic in the US, UK, and Canada reporting it is a problem.

But an even bigger question still is if Gen Z enthusiasm can be matched by real returns. Studies have pointed5 out that active trading doesn’t guarantee good performance. In fact, passive investors can easily outperform day traders. It’s easy to imagine that many Gen Z investors will, perhaps, learn the lessons of investing the hard way. 

Nevertheless, young people’s interest in the stock market is never a bad thing. Bankrate Chief Financial Analyst Greg McBride highlighted that “it is important for Gen Z and millennial investors to maintain the long-term focus, increasing contributions to stock-related investments, and harnessing the power of compounding higher rates of return.”

Instead of treating Gen Z’s hurdles as problems, companies, non-profits, and educators must instead look into the opportunities to turn curiosity into a real productive force.

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The information and content mentioned in Global One Media’s blog are not intended to be and do not constitute financial advice, investment advice, trading advice or any other advice or recommendation of any sort. The content found in this blog is for general information only and was created for exclusive distribution on Global One Media’s network. Global One Media presented information that was available to them at the time of writing, for informational purposes only and is not intended as investment advice. Global One Media has no investment relationship at all with any entities discussed in the blog. Investors should seek financial advice before making any investment decisions.