Gen Z’s stock market FOMO has them actively trading

In a stock market that has risen and fallen so dramatically over the past year, most Gen Zers are diving headfirst into it. Nine in 10 say they are actively trading and dealing with economic factors such as inflation and rising interest rates, significantly higher than any other generation. poll established. FOMO could mean that Gen Z is blindly following investment trends, as they did during the pandemic-era meme stock boom, but that may not be the case here. According to one expert, it just means that investing issues are going mainstream, and Gen Zers are using their diverse financial resources to learn.

Nearly 90% of Gen Z investors in 2023 said they bought, sold or kept additional investments in response to rising inflation and interest rates, according to a Bankrate survey of nearly 3,700 U.S. adults. In contrast, only 68% of Millennials, 38% of Gen Xers and 35% of Baby Boomers had a similar reaction.

Gen Z also buys more than anyone else. More than half of Gen Z investors said they expect to invest more in stock-related investments this year than last year, compared with 43 percent of Millennials, 19 percent of Gen Xers and 9 percent of Baby Boomers. FOMO isn’t limited to Americans, either: While 41% of Gen Zers in the U.S. and Canada cite FOMO as a reason for their investments, in a recent survey CFA Institute According to the survey, 60% of young Chinese investors and 43% of young British investors expressed similar sentiments.

It’s no surprise that the youngest adults are active spenders. This generation has seen the rise and fall of the meme stock boom, the bursting of the cryptocurrency and NFT bubble, and the collapse of multiple banks since the pandemic began. Apps like Robinhood are making transactions easier than ever, which, combined with Gen Z’s overall cynicism about the economy and institutions, may have given them a different financial outlook than any generation before them. According to Barron’s, Generation Z is already more financially active than any generation of the same age, with more than half invested in the market and a quarter invested in individual stocks. Report.

While day trading is a way to pass the time, for the average person, day trading is not a great way to build wealth. study It has been consistently shown that active traders, even professional traders, underperform compared to investors who follow a “set it and forget it” approach.

“The evidence has been shown time and time again: Passive investing beats the vast majority of investorsincluding professionals,” wrote former equity analyst James Royal in an article bank rate article. He urges young investors looking to accumulate capital over the long-term to consider proven strategies, writing: “Chief of these strategies is a passive approach that takes a long-term perspective.”

“Market timing is almost always a loser. But in high-volatility years, it’s especially a loser,” Derek Horstmeyer, a professor of finance at George Mason University, wrote for the Financial Times. wall street journal.

in the spirit of the times

Not everyone is concerned about Gen Z’s shift to the marketplace.Katie Perry, managing director of investor relations at investment platform Public, said: wealth The “mainstreaming” of the conversation around finance and investing could be a powerful motivator for younger investors.

“Most of your friends have an investing app on their home screen. It’s part of the conversation, but it’s not,” Perry said. “Part of that might just be keeping up with the culture, which means keeping up with the financial aspects of life that weren’t part of the zeitgeist before.”

Case in point: Financial influencers are growing in popularity on TikTok and Instagram, according to a Public survey of more than 2,000 retail investors and 25% of Gen Z investors who said social media was one of the sources they used for investment research and ideas. Historical investment flows were reviewed.

But social media wasn’t a driving factor when they invested — about the same number of Gen Z investors also said they used broker research and other educational materials from financial institutions and apps. Instead, Gen Z are more likely than any other generation (22%) to use generative AI tools to conduct financial research and consult family and friends, the report found.

This suggests that Gen Z are taking advantage of the growing diversification of financial resources and are confident in their investment strategies – 71% said they were confident about the second half of the year, almost as confident as Baby Boomers, the report said.

Being the most economically connected generation can be a huge advantage for Gen Z. As long as they have the patience to hang on in the stock market, their early start can help them avoid investors’ most common regrets. wait too long invest.

“The optimistic view is that Gen Z has more tools and information than any other generation, and they’re using them,” Perry said.