‘Young adults’: a potential band name and an actual second name that is used to refer to Generation Z. While these two labels are used interchangeably, they are often used to make references to how nonchalant, careless and swanky they are. However, the opinion on these young adults have swivelled 180 degrees because they may be young, but they are making astute plans about their finances – especially investing.
As the digital natives of the 21st century, Gen Z is coming of age in a world brimming with opportunities. While they are known for their tech savviness, not everyone is aware that they are seeking investment avenues that align with their values. Interestingly, there is a stark difference between the investment patterns of Gen Z and the older generations. Especially the platforms that they get their financial advice from, which is mainly social media and family.
A study carried out by market research firm Prolific, on behalf of Forbes Advisor revealed that a significant 79% of millennials and Gen Z individuals have sought financial advice from social media platforms. However, the question arises: is it wise for Gen Zers or any individual to depend on social media for making financial decisions? Personal finance experts hold differing views on this matter. Amidst such debate then, based on the Gen Z’ers preferences, where can they park their money?
Navigating the investment landscape
While where Gen Z puts their money differs from stocks to cryptocurrency to technology, there is an indication that real estate is one of the leading preferences. Investing in real estate appears to be a viable option because it is a physical asset that offers the advantage of delivering steady and dependable returns over the long term. Regardless of whether you choose to invest in residential or commercial properties, you have the opportunity to generate passive income by renting out these properties. Additionally, there’s the potential for realising substantial profits through the appreciation of property value over time. By owning investment properties, you create a form of financial protection against the impact of escalating costs across various aspects of life.
Apart from that, an investment option that is gaining quite the traction is meta platforms.
Meta platforms hold a dominant position within the social media and online advertising sectors, being the parent company of Facebook, Instagram, and several other popular platforms including Threads.
As expected, Bank of America has recognized Meta as one of the leading stocks appealing to Gen Z investors within the social media category. An article titled ‘9 Best Gen Z Stocks to Buy’, penned by Wayne Duggan for ‘U.S. News’, carries analyst Justin Post’s opinion where he says that recent layoffs and other cost-saving initiatives by Meta will contribute to maintaining favourable earnings in the immediate future. Post also highlights that further cost reduction, integration of artificial intelligence, and the monetization of Reels will serve as significant drivers of growth over the upcoming three to five years. Bank of America has assigned a “buy” rating to Meta stock and set a target price of $230. As of April 20 2023, Meta stock closed at a price of $213.07.
In addition to real estate and Meta, investing in collectibles offers a unique advantage- the ability to invest in items that hold personal value and significance. Categories like art, antiques, rare books, NFTs (Non-Fungible Tokens), vintage wines, watches, jewellery, and even sports memorabilia like baseball cards present opportunities for generating long-term profits as the value of these items increases with time. This is especially beneficial for younger investors who might be hesitant about the stock market. Collectibles possess a low correlation with conventional financial investments, providing an excellent avenue to safeguard capital during times of market volatility. In essence, investing in collectibles enables individuals to combine their passion with financial opportunity, while also diversifying their investment portfolio.
What does the next gen’s investment landscape look like?
Currently, the new generation has taken a keen interest in investing and exhibiting distinct preferences compared to earlier generations. Unlike their predecessors, they are drawn to investment options that offer appealing returns while also featuring shorter commitment periods or easier withdrawal processes. They prioritise platforms that offer greater flexibility and convenience in their investment journey.
The demographic of Gen Z consists of individuals that are currently aged between 18-26 years. According to experts, many investors within this age group may not initially approach investing with a serious mindset, using their early years in the financial realm to gather experience from their investment choices, whether successful or not. Nonetheless, there exists a subset of astute investors among these young individuals who are attracted to investment avenues that are more straightforward, self-directed, and provide better tax-related benefits.
This generation is so deeply rooted in the investment game that according to a research done by CFA institute in November/December 2022 via an online survey ( a global institute of investment professionals), Canada stood out with the highest proportion of Gen Z individuals who are engaged in investing compared to those who are not. A significant majority, approximately 74% of Canadian Gen Z report owning at least one type of investment. This figure is notably higher than the corresponding numbers for other countries (USA, UK and China) that were included in the study. Specifically, 56% of Gen Zs in the U.S, 49% in the U.K. and 57% in China claim ownership of investments.
In 2023, as indicated by NASDAQ, the current situation is such that a significant 73% of Gen Z have invested in stocks, making this form of investment the most prevalent among them. The same study reveals that within this generation’s investor base, 15% are utilising Exchange-Traded Funds (ETFs), 30% have investment bonds, and 22% are purchasing index funds.
Due to their strong affinity for technology, Gen Z is especially open to exploring newer investment avenues. Impressively, 47% of Gen Z are respondents that stated that they own cryptocurrency stocks. The spending behaviours of Gen Z are also reshaping the investment landscape and can serve as valuable insights for identifying stocks to monitor. A survey conducted among 9,500 Gen Z members by U.S. News highlighted Starbucks (SBUX) as the leading publicly owned brand in their eyes, followed by Chipotle Mexican Grill (CMG) and Nike (NKE). These shifting preferences in consumer brands can offer important indicators of stocks that warrant attention for potential investment opportunities.
If you thought that the frenzy that Gen Z had for Meta was high, the AI craze will leave you speechless. Seana Smith, in her piece about ‘Top Stocks for Gen Z Investors’ points out how this year, stocks related to AI have experienced significant growth, and according to experts, there is still more potential for two major winners in this recent surge.
AI has become a major focus and will continue to gain momentum in the investment landscape. In the same article, Ken Mahoney from Asset Management highlighted Nvidia and Microsoft as prime choices for Gen Z in this AI driven trend.
Nvidia’s prominent position in the race for AI chips and Microsoft’s substantial $10 billion investment in OpenAI have been key factors driving the impressive performance of these stocks since the beginning of the year.
All this data and statistics make one thing clear and that is that Gen Z is serious about the business of investing. Irrespective of where they get their financial advice from, they are investing rapidly. Even though some begin to invest because of F.O.M.O., overall there is a significant difference in how these young adults perceive investing: driven by their digital proficiency and access to various sources of financial information.
(Sandunlekha Ekanayake)