Let’s face it: younger generations—specifically Gen Z adults (those born after 1996)— have spearheaded an entirely new investing strategy. As digital natives, Gen Z is the first generation to access technology that enables them to invest early and alongside a community.
Gen Z is poised to grow yearly, too, which means it is only a matter of time until they drive the market. As noted in our recently released Second Quarter 2022 Apex Next Investor Outlook report, which focuses on the rising Gen Z and Millennial demographics, over the next 25 years, nearly $70 trillion of wealth is expected to transfer from baby boomers to younger generations, including Millennials and Gen Z (Cerulli Associates).
Larger investment actions and significant financial decisions by Gen Z and Millennials will influence the economy in future generations. Learning lessons from older generations, these populations are driving new investing habits. From creating different types of diverse investment portfolios to using social media to conduct investment research.
Social Researchers
Armed with new and emerging technology, younger generations turn to social media and peers to inform investing decisions. Connor Coughlin, General Manager, Fintech at Apex Fintech Solutions, touches on this in a recent Nasdaq TradeTalks appearance. “The ways in which younger generations are securing their investing information is changing, and the sources to do so have evolved,” Coughlin said. “But the content and information are the same – it is just delivered in new ways.”
According to Nasdaq, Gen Z spends more time researching an investment before buying or selling compared to older generations, with 40% spending at least 1 hour but less than a day, 30% spending at least a day but less than a week, and only 3% not researching at all. This time isn’t spent simply “doomscrolling” through news stories and graphs, either: Gen Z is actionable with the data and insights gleaned from social media. According to a survey by M1 Finance, nearly 60% of Gen Z and Millennial investors have invested due to social media.
In contrast, Millennials are using social media to survey economies abroad. Our survey found that Millennials are embracing China’s increasingly dominant economy, investing heavily in major Chinese companies such as Alibaba, TAL Education Group ($TAL), JD.com ($JD), and Ctrip ($CTRP).
What this means: Social media platforms are much more than viral cat videos and political snark; they help influence investing decisions and play a key role in financial literacy, community-building, and advice, with growing research and education on these platforms.
Investing in Dividends as a Safe Harbor
Searching for a safe harbor amid stormy markets, Gen Z embraces the stability of dividend stocks over the dynamic market movements of growth stocks. The reduced volatility of dividend stocks can be especially significant during wide market swings.
According to our report, this population invests in well-known, income-generating companies, including Walmart, Verizon, and Home Depot. Food and beverage stalwarts like McDonald’s and PepsiCo did well, and natural gas distributors offered healthy dividend yields with Enterprise Products Partners.
What this means: With youth on their side, Gen Z can generate much higher returns with dividends than those who begin investing later in life. That means continued investment in dividends. Equipped with more research, we predict Gen Z to focus on building long-term portfolios around consistent, high-yielding companies.
Caution With Crypto
Data from our Second Quarter 2022 Apex Next Investor Outlook report states that Millennials represented 54% of crypto-enabled accounts, with Gen Z and Gen X each accounting for 21%.
Gen Z investors appear to be gearing up for a sustained slowdown in the cryptocurrency market by moving away from publicly traded crypto-related stocks. Our report shows that publicly traded crypto stocks lost significant value during the second quarter, including Coinbase, Marathon Digital, Grayscale Bitcoin Trust, and Riot Blockchain.
However, these investors still believe in the practical application of the technology. A considerable amount of Gen Z is invested in Web3. In this new paradigm, websites and applications can process data in an intelligent human-like way through Gen Z technologies like machine learning (ML), data processing, decentralized finances, and ledger technology. These are destined to be more intellectual and autonomous for internet users. According to a survey by AFR, 71 percent of respondents aged 18 to 44 have either “some,” “quite a bit,” or a “great deal” of confidence about investing in crypto.
In contrast, Millennial investors remain bullish, particularly in flagship cryptocurrencies Bitcoin and Ethereum. There were approximately 410,000 new crypto-enabled accounts opened with Apex Crypto in Q2, bringing total end crypto user accounts to over 4.9 million. Broken down by generation, Millennials represented 54 percent of crypto-enabled accounts, with Gen Z and Gen X each accounting for 21 percent.
What this means: Despite the crypto crash, Gen Z and Millennials ultimately still see digital assets and investing as part of the future, and many still want to be involved in the space.
They Like Technology and Sustainability
Compared to other generations, Gen Z is more likely to invest in companies with positive environmental impacts or social causes they care about. Our findings support the notion that young people are more eager to invest in companies that align with their values with younger generations investing in Beyond Meat ($BYND) and Tesla.
Millennials and Gen Zers are also increasingly interested in ESG investments, which consider environmental, social, and governance factors, according to Nasdaq.. These investments enable this population to align values with their investment portfolios.
As social media researchers, Gen Z investors reacted enthusiastically to Elon Musk’s proposed takeover of Twitter. According to our report, the reaction was broadly positive, propelling Twitter to the top of our list of stocks in which Gen Z invests. Gen Z support for Tesla also stayed strong: According to our report, the electric vehicle maker retained the #1 spot and grew its position count among Gen Z by 5% in Q2 vs. Q1.
What this means: We anticipate Gen Z to continue making investments in ethically sound organizations that align with their moral compass amid growing environmental and sustainability concerns. Of course, this could fluctuate depending on outside forces like politics, the environment, and current events. Additionally, as the first generation to witness the true impact of emerging technology, we expect Gen Z to continue investing in companies that benefit humans at large.
Conclusion
As the first generation of digital natives, Gen Z’s investing habits will significantly impact the economy as the population grows. Gen Z tends to engage in risky behavior less than previous generations—opting for stability and historically-sound investment rather than volatility.
Millennials, on the other hand, still believe in the promises of Web3 and blockchain, so they continue making riskier investments in crypto. In contrast, they’re looking at investment opportunities overseas, like those within China’s dominating, stable economy.
By examining these habits, we can use this information to predict trends and cater to a growing generation that will soon make the major decisions that will impact the world at large.
Though financial access and literacy may be greater than ever, at Apex Fintech Solutions, it’s our mission to advance that access across all generations through education and game-changing technology. We believe that everybody should have access to financial markets, and we build the tools that promote financial freedom.
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We recently released our Second Quarter 2022 Apex Next Investor Outlook. The report, which analyzes proprietary data of US-based investors on the Apex Clearing platform, sheds light on the top 100 stocks held by investors as of June 30, 2022, with a special focus on the rising Gen Z demographic. The report also includes an analysis of cryptocurrency trading data across the platform for the first time.
Read the report here.
