GenZ is a growing force of investors who are breaking the traditional barriers to entry into the financial markets by showing a preference for mobile applications, online investment tools, and digital platforms. Overall, their investing behavior is different from previous generations, with the GenZ starting to invest at a surprisingly young age – more precisely, studies show that 56% of US GenZs aged 18-25 own some type of investment, and among these, 25% have started investing before they were 18. This generation is open to exploring diverse income streams, whether freelance work or a creative business idea, and they are also more likely to embrace tech, as they view it as a tool to democratize finance and enhance global access to investing. In this blog, we delve into the behaviors and attitudes of GenZ towards investing, so keep reading to find out more!
What Kind of Investments do GenZs Own?
GenZ investors are risk-takers, as reports show an impressive 55% own cryptocurrencies, and they are open to learning where to purchase bitcoin and making it part of their investment strategy. However, they are also interested in other types of assets, such as individual stocks (41%) and mutual funds (35%). Unlike the older generation, they aren’t likely to use mutual funds as much – they’d rather choose innovative assets like crypto and NFTs. This might be because they have fewer financial responsibilities at the beginning of their careers, which makes them more open to speculative investing, and although this is beneficial, they must still learn how to mitigate unnecessary risks and adjust their strategies accordingly.
Among GenZ investors, most of them are males who have a college degree and a higher household income – this clearly shows the role your financial situation plays in investing (especially when it comes to risky assets such as crypto) because there are also GenZs who aren’t exploring investment options because of the income constraints they face.
GenZs are motivated to invest in crypto mainly due to their widespread popularity and the influence of digital apps. Many individuals from this generation make investment decisions based on the suggestions that financial apps provide and also due to a fear of missing out. As everyone on social media is talking about the hottest investing trends, GenZs cannot help but be drawn to crypto because they don’t want to miss out on such big opportunities that could help them reach their financial goals.
Their willingness to try new things and take risks isn’t a bad thing, but GenZs shouldn’t ignore portfolio diversification, as this is a strategy that can help them increase returns. Therefore, they shouldn’t only look at new investment instruments but also consider allocating a part of their portfolios to traditional investments.
What are GenZs Priorities and Goals that Motivate Them to Invest?
When looking at non-investing and investing GenZs, there are some notable differences between them in terms of their goals. Among the top three goals of non-investing GenZs are the ability to pay their monthly bills, having enough money to travel around the world, and not having to live paycheck-to-paycheck. On the other hand, GenZ investors are more oriented towards achieving financial independence: they don’t want to rely on their day-to-day jobs as much as non-investors do, but rather, they seek to have a source of income outside of their jobs. Moreover, they prioritize saving for unforeseen expenses, and interestingly, many investing GenZs also save for retirement because they want to be able to live comfortably. Financial goals play a huge role in GenZ’s investing journey because it can help them stay focused and make decisions that align with what they want to achieve. It can feel tempting to chase investment trends, but a goal-based investment approach enables GenZs to remember the fundamentals instead of falling for the hype. Ultimately, when it comes to wealth planning, it’s essential to remember that wealth accumulation isn’t a sprint but a marathon, and the key to success is to build discipline and adopt a long-term perspective.
GenZ Mainly Relies on TikTok and Pther Social Media Platforms for Financial Advice, But that Comes at a Cost.
Among the preferred information sources of GenZ investors are social media and Internet searches. Young investors spend so much time online that they find it convenient to get advice on TikTok, for example, and engage with influencers for tips on money-saving or money-making. But is this really beneficial for GenZs? Not really, because influencer content on TikTok often lacks sufficient disclosures, making it difficult for young investors to evaluate the information’s objectivity. The truth is that influencers in the financial industry ( just as in any others) are often paid to promote a specific financial product, which means their advice may not always be accurate, and GenZs could expose themselves to unnecessary risk, potentially losing their money.
So, what is the right action to take? Well, rather than chasing trends, they should focus on fundamentals like an investment’s business model, its record of returns, and obviously, on a risk management strategy. If GenZs don’t know where to start in their investing journey, the wisest thing to do is to seek guidance from a professional because that’s how they will equip themselves with the proper knowledge to navigate the crypto landscape confidently and, thus, secure a brighter financial future for themselves.
The Bottom Line
GenZs are investing at a significant rate, and they are particularly interested in digital assets because they resonate with the decentralized nature of this technology. Unlike older generations, they are more skeptical of traditional financial institutions, and since they are tech-savvy, they feel more confident about stepping into financial independence and having more control over their money.
However, many tend to act based on FOMO and don’t use the most reliable sources when it comes to investing. But since investing requires financial literacy, it is imperative to remain cautious and use trustworthy sources to stay educated on the most critical aspects of investing. Social media doesn’t provide unbiased information on crypto and other investments, and this is why it’s recommended for GenZ to seek professional advice before they put their money down. As long as GenZ approaches investing with a long-term mindset and strives to build wealth over time – and not overnight- they could achieve the financial independence they desire.