Gen Z and Millennials Bridge Investment Strategies, Think a Lot about Risk

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Most young investors — members of both the Gen Z and millennial generations — can access the stock market more easily than any previous generation, and a new survey finds that while these investors are bridging new and old investing strategies, risk is top of mind for all of them.

See: Millennials Own More Crypto Than Any Other Generation
Find: Surprising Ways Gen Z and Millennials Are Worlds Apart Financially

Gen Z (ages 18 to 24) and millennial (ages 25 to 40) investors contribute to a mix of traditional and newer asset classes, stock types and sectors. And despite the recent media attention on SPACs, IPOs and meme stocks, most young investors are unlikely to hold those types of stocks, according to a new Motley Fool survey.

“The data suggests that Gen Z and millennial investors are more interested in traditional investing plays than trying to ride the meme stock wave, despite the spotlight on meme stocks and young investors over the past six months,” Jack Caporal, Motley fool research analyst, tells GOBankingRates. “Almost a quarter of respondents didn’t know what a meme stock was, which may make them hesitant to invest in them.”

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Indeed, the survey notes that just 30% of respondents own meme stocks, making them the third least popular type of stock among all respondents. Breaking down the data further, the survey notes that 39% of Gen Z own meme stocks compared to 28% of millennials.

Stocks “are king” for members of both generations, the survey finds, with 73% of Gen Z investors, 66% of millennial investors and 67% of investors aged 18 to 40 overall owning stocks, making them the most common type of investment in this age group. Another key finding of the survey is that Gen Z and millennials are betting on tech, as respondents were most likely to hold stocks in the financial sector, with 42%; information technology sector, with 40%; and high-tech/emerging technology sector, with 38%.

Mutual funds were the second most common type of investment among investors aged 18 to 40, with 45% of respondents invested in them.

In terms of crypto investments, the survey finds it is the third most popular type of investment among all respondents and the second most likely to be held by Gen Z investors, with 47% of Gen Z investors holding cryptocurrency compared to 39% of millennials.

Male investors aged 18 to 40 were also more likely to hold cryptocurrency than female respondents — 46% of male respondents reported holding that type of asset compared to just 33% of female respondents, the survey notes.

However, an important finding of the survey is that there is a generational split on crypto risk. Gen Z sees cryptocurrency as a less risky investment than stocks and options, while millennials view cryptocurrency as the riskiest investment.

Discover: Investing Apps for Teens: Educational or Risky?

“One factor could be that the value and acceptance of cryptocurrency and fintech generally has matured alongside Gen Z — already a generation of digital natives familiar with new investing concepts and technology,” Caporal says. “Millennials were raised in the more traditional world of stocks and bonds and brokerage services being offered through your typical bank with a brick and mortar presence. As a result, Gen Z may be more accepting of cryptocurrency than millennials.”

An additional point of the survey is that investors of marijuana and meme stocks are more likely to own cryptos, with 65% of investors that hold marijuana stocks also owning cryptocurrency, and 51% of meme stock owners hold cryptos.

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“One reason could be that marijuana stocks, meme stocks and cryptocurrency are all relatively new and fast-moving areas and could be seen as plays with higher potential payoffs,” Caporal says.

The survey however finds that interest in marijuana stocks relative to other sectors remains low among Gen Z and millennial investors. Just 18% of respondents said they owned marijuana stocks, making it the second least popular sector ahead of consumer discretionary stocks.

Interestingly, the survey finds that ESG stocks  (Environmental, Social and Governance) haven’t caught on yet for these generations, with  25% of Gen Z and millennial investors reported owning ESG stocks, while 32% said they don’t know what an ESG stock is.

Caporal says that ESG is a relatively new term, particularly in the investing world, and it doesn’t appear to be a well-known acronym or concept among young investors.

“Another factor that could contribute to low interest in ESG stocks is the fact that some ESG funds come with higher fees, which could dissuade investors from investing. And it’s not clear that all ESG funds live up to their acronym – there’s no universal criteria for what qualifies as an ESG stock or fund and several large ESG ETFs hold stakes in oil and gas companies. Those factors may cause environmentally conscious young investors to think twice about investing,” he adds.

See: 10 Best ETFs for Easy ESG Investing
Find: How To Get Started With ESG Investing

Finally, risk is top of mind for both generations, with  95% of Gen Z and millennial investors saying they think about risk when investing. Breaking it down further, 23% think about risk a little when investing, 38% think about it some, and 34% think about it a lot.

In addition, the survey finds that males are less likely than females to think about risk — 7% of Gen Z and millennial male investors don’t think about risk at all when investing compared to 3% of females. Young female investors are also more likely to think about risk a lot compared to their male counterparts.

This suggests that young investors understand that investing is never risk-free, despite the recent bull market,” Caporal says.

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About the Author

Yaël Bizouati-Kennedy is a former full-time financial journalist and has written for several publications, including Dow Jones, The Financial Times Group, Bloomberg and Business Insider. She also worked as a vice president/senior content writer for major NYC-based financial companies, including New York Life and MSCI. Yaël is now freelancing and most recently, she co-authored  the book “Blockchain for Medical Research: Accelerating Trust in Healthcare,” with Dr. Sean Manion. (CRC Press, April 2020) She holds two master’s degrees, including one in Journalism from New York University and one in Russian Studies from Université Toulouse-Jean Jaurès, France.

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