Generation Z, also called Zoomers, is the demographic group that comes after Millennials but before Generation Alpha. Born in the late 1990s to early 2010s, they are largely Generation X’s children (aka the latchkey generation). Morgan Stanley predicts Gen Z will have 78 million members by 2034, making them America’s largest generation (MS).
Let’s look at Gen Z’s distinct characteristics to discover how they invest differently than their predecessors.
Gen Z has portable digital devices from a young age, making them digital natives. The youngest generation member was 5 when the iPhone debuted. This generation barely remembers life before smartphones. 60% of Gen Z used a smartphone before age 14 and 3 out of 4 use money-transfer applications like Venmo or Zelle at least once a month, according to a Morgan Stanley poll.
Gen Zers use social media daily. TikTok will surpass Twitter (TWTR) in Gen Z popularity in 2021 due to its focus on images and videos. 52% of this generation are non-Hispanic white, compared to 61% of Millennials, 70% of Gen X, and 82% of Early Boomers. 22% have at least one immigrant parent, compared to 14% of Millennials.
They’re predicted to be the most educated and have the most college-educated parents. Politically, they are less inclined than previous generations to consider the U.S. as superior to other countries and are enthusiastic about racial and ethnic diversity.
Gen Z is less risky than past generations, with fewer teenage pregnancies. They drink less. Generation Z is “stressed, miserable, and exam-obsessed” 70% of Pew Research Center poll respondents described anxiety and sadness as major difficulties among peers, not binge drinking or unexpected pregnancies.
Pandemic Effects
Gen Z would have come of age during a strong economy with record-low unemployment, until the pandemic. Now, at the start of their adult lives, they face heightened uncertainty due to the global pandemic and decades-long geopolitical shifts.
Pandemic affected this generation hard. Pew Research Center found that half of older Gen Zers (ages 18 to 23) lost a job or had their wages lowered due of the pandemic. This is substantially higher than Millennials (40%), Gen Xers (36%), and Baby Boomers (25%). The consulting firm BCG showed that 66% of Gen Z members surveyed were pessimistic about the pandemic’s impact on their wallets, compared to 61% of Millennials, 62% of Gen X, and 51% of Baby Boomers.
According to a March 2021 CreditCards.com survey, Gen Z investors are roughly five times as likely to obtain financial advice from social media as those over 41. The survey indicated that Gen Z investors were more inclined to seek financial guidance than Gen X and Baby Boomer investors.
91% of Gen Z have utilised social media for investing research, more than any other source, with 61% citing Reddit as a trustworthy source. 82% of Millennials and Gen Zers felt traditional investment websites are more trustworthy than YouTube. 71% of Gen Z utilised YouTube for financial information in the last month, 42% used Reddit, 36% used TikTok videos, 28% used Meta Platform’s (FB) Facebook, 32% used Twitter (TWTR), and 27% used Meta Platform’s Instagram.
What do Gen Zers buy?
An April 2021 Motley Fool survey looked into Gen Z’s investment preferences.
Stocks are the most popular investment for this generation (73%).
Growth and dividend equities are the most popular, held by 58% of respondents.
Crypto is held by 47% of Gen Zers.
Only 30% of respondents held meme stocks, despite their use of Reddit.
According to a McKinsey Research poll, 90% of Gen Zers feel firms “have a responsibility to address environmental and social issues,” but according to the Motley Fool’s survey, just 25% of Gen Z and Millennials own ESG stocks and 32% don’t know what an ESG stock is.
The most popular sector was Financial Services (42%), followed by Technology (40%) and High-Tech/Emerging Tech (38%).
35% of Gen Z invest in mutual funds, compared to 47% of Millennials, and 15% use ETFs, versus 23% of Millennials.
Gen Z has 30% in bonds.
39 percent own stock options.
Index funds are used by 22%.
How do Gen Z invest?
The combination of brokerage competition and technological progress has made investing more accessible, with commission-free trading and simple access from a range of devices. This makes Gen Zers more active than their parents. The growth of social media-based Finfluencers has led 17% of individuals polled to embrace a get-rich-quick mentality, expecting double- or triple-digit returns, according to The Royal Mint. 64% have lost money to such schemes.
A new Nasdaq survey in collaboration with Morning Consult found that 2,000 retail investors favour this strategy. The survey indicated that 48% of Gen Z investors check their portfolios numerous times a day and 24% do so once a day. Compared to 39% and 22% for Millennials, 16% and 19% for Gen X, and 10% and 12% for Baby Boomers. Gen Z is far more active than Millennials, Gen X, and Baby Boomers, with 34% trading a few times a week vs. 26%, 19%, and 7%, respectively.
Historical data shows that frequent trading is generally connected with worse returns, which worries active Gen Zers. Generation Z spends more time investigating investments before purchasing or selling, with 40% spending at least 1 hour but less than a day, 30% spending at least a day but less than a week, and 3% not researching at all. 30%, 29%, 2% for Millennials, 22%, 31%, 10% for Gen X, and 20%, 18%, 25% for Baby Boomers.
64 percent of Gen Zers choose Robinhood (HOOD) to conduct trades, compared to 38% for Vanguard, 29% for Fidelity, and 29% for Ally Invest. New platforms Wealthfront, Thinkorswim, and Rally are gaining ground with 23%, 21%, and 21%, respectively. 13 apps are used by at least 10% of Gen Z and Millennial investors, but none by more than 37%, according to The Motley Fool. The Motley Fool discovered that 37% of 18- to 40-year-olds used Robinhood in the past month, compared to 40% of 18- to 24-year-olds.
Low financial literacy in America is due to little formal personal finance education. Thanks to cellphones, most of us have access to a wealth of information. Gen Z’s ease with powerful tools bodes well for their ability to learn. Personal finances are highly personal, thus people must educate themselves in a way that fits them. Seek for advisors who understand your situation. Actively seek differing viewpoints so you may completely understand the dangers and make informed judgments about what to invest in and what investing schedules work for you.
