As U.S. stock markets have become more volatile in 2020, many young investors have taken to trading. These young traders, also referred to “Robinhood traders” after popular trading app Robinhood, are Millennials (born between 1980 and 1995) and Gen Z-ers (born between 1996 and the early 2000s). Where is Gen Z investing?
How many Gen Z investors are there?
According to Adecco, there are about 90 million Gen Z-ers in the U.S., and around 80 million Millennials. Not all are investors. However, as shown by Warren Buffett, who started investing when he was only 11, investing early has its share of benefits, including compounding. Furthermore, by 2025, Gen Z's spending is expected to surpass that of baby boomers.
Gen Z investors in 2020
In 2020, many Gen Z investors have outperformed marquee fund managers, as some Gen Z-ers bought into the U.S. stock market crash in March that prompted many fund managers to sell. Even Buffett was a net seller of stocks in the first and second quarters of 2020.
Airline stocks deserve special mention here. While the Oracle of Omaha (as Buffett is known) dumped airline stocks in April, many young investors bought them at low prices. The stocks then rose sharply, and many young investors profited handsomely.
Gen Z investors take the DIY approach
Gen Z investors seem to prefer the DIY approach to investing. According to Gen Z @ Work co-author Jonah Stillman, “There’s an underlying assumption that almost any task can be taught or learned by yourself.” He added, “Why would I go to someone for financial advice when I can find what I need online?” The popularity of investing app Robinhood corroborates Stillman’s views.
Where is Gen Z investing?
A Morningstar survey of over 1,300 U.S. adults between 18 and 25 provides insights into where Gen Z is investing. The most important finding may be that 83 percent wanted to buy a home, going against the general perception that young people aren't interested in the "boomer" goal of homeownership.
Of the survey respondents, 35 percent identified themselves as investors, and 57 percent said that they wanted to learn more about investing. Although every one of the respondents reported that they were using at least one financial app, most weren't keen on robo advisors and found human advisors more trustworthy.
Gen Z and impact investing
Gen Z-ers are also interested in impact investing, with socially responsible investments having gained a lot of traction over the last decade. Stocks such as Tesla, which many older investors and analysts find overvalued, are the most popular stocks among Gen Z and Millennial investors. As the Gen Z cohort grows and its investors gain more wealth, companies are taking measures to address the market and appeal to young investors.