Here’s Why 46% of Gen Z Takes Risks When It Comes to Investments
Written by
Cameron Diiorio
Edited by
Gary Dudak
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According to a report from the Finra Foundation, 46% of Gen Z investors around the globe are willing to take risks — more so than any other generation. Additionally, it is shown that Gen Z has a high interest in NFTs and cryptocurrency, investments that older generations may not be keen on adding to their portfolio.
So, why are Gen Zers such risk-takers? Here are some key factors that contribute to Gen Z’s propensity to take risks when it comes to investing.
They Follow Trends
Gen Z is highly likely to follow the latest trends, whether it’s what people are recommending on TikTok, brands that are popular on Instagram, or the investing world’s hottest stocks.
While being willing to try new things can be a good thing, with a large percentage of Gen Z investing in only crypto or NFTs, many of them are neglecting portfolio diversification.
“The most important thing is to know how to manage risk and diversify your portfolio,” said Young Pham, investment advisor at Bizreport.com, a business information platform. “No matter what you do, you must never put all your eggs in one basket.”
In addition to investing in crypto and NFTs, Gen Z’s risky investments sometimes involve dumping all of their cash into a particular few stocks they hear will do well from friends or online. Gen Zers may be more likely to make high-risk investments because they see hot trends and want to emulate that.
Lack of Education
Many members of Gen Z come into investing without a background in finance. This leads to a significant portion of Gen Z impulsively putting their money into single stocks.
“There is a huge market of people, primarily Gen Z, who really want to invest but don’t know where to start,” said Miles Cole, CEO of Follow, a start-up that helps Gen Z invest. “The natural knee-jerk reaction is just to make one big investment. [Sometimes] it’s not the most informed decision.”
Because investing is now so easily accessible, with apps like Robinhood allowing just about anyone to get involved, people who are uneducated can put their money into a stock they may not know much about. Gen Z’s lack of education is what leads them to make risky, oftentimes uninformed decisions.
Investing With No Capital
One of Gen Z’s biggest problems is they have less money to invest than other generations. This, by nature, makes any investment Gen Z makes a risky one because this generation has no money to fall back on if their investments go wrong.
“For [Gen Z], who don’t have a lot of disposable income yet, they want to focus on their savings habits and then focus on what investments to buy with the money that they’ve saved up,” said Christopher Manske, founder of Manske Wealth Management.
Gen Z is new to the workforce. Some may not have full-time jobs and are even living at home. Thus, they have not had the time to build up their savings or emergency fund — and oftentimes will make quick decisions regarding stocks because they believe it will net them a high reward.
As a result, they may blow through their savings with poor investments, leaving them with nothing to fall back on.
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