Generation Z’s FOMO pushes them to trade more than any other generation. Do they secure their future or lead themselves to ruin?

Generation Z's FOMO pushes them to trade more than any other generation.  Do they secure their future or lead themselves to ruin?

Generation Z participates more actively in the stock market than any other generation. Why? They have a fear of missing out, or “FOMO.”

In the stock market that has seen sharp ups and downs over the past year, most Gen Z people are diving into their own thoughts. Nine in 10 say they trade actively and respond to economic factors like inflation and higher interest rates, far more than any other generation, Bankrate reconnaissance is found. FOMO might indicate that Gen Z is jumping blindly on the investment bandwagon, as they did during the pandemic-era meme stock craze, but that may not be the case here. One expert says this means investment concerns are becoming mainstream and Gen Z is using their diverse financial resources to learn as they go.

In 2023, nearly 90% of Generation Z investors will say they have bought, sold or withheld additional investments in response to inflation and rising interest rates, according to the Bankrate survey, which interviewed nearly 3,700 American adults. By comparison, only 68% of Millennials, 38% of Generation X, and 35% of Baby Boomer investors responded similarly.

And Gen Z buys more than anyone else, too. More than half of Gen Z investors said they expect to invest more in stock-related investments this year than last year, compared to 43% of Millennials, 19% of Gen X, and 9% of Boomers. FOMO isn’t limited to Americans either: while 41% of Gen Z in the US and Canada cited FOMO as a reason to invest, in a recent study CFA Institute In the survey, 60% of young investors in China and 43% in the UK expressed similar sentiments.

It is not surprising that the youngest adults are very active with their money. Since the pandemic, this generation has seen ups and downs Mad stock memeThe emergence of cryptocurrency and NFT bubbles, and several Bank failure. Apps like Robinhood have made trading easier than ever, and that’s in addition to Gen Z in general Cynicism towards the economy and institutions, possibly giving them a different financial outlook than any previous generation. Already, Generation Z is more financially active than any generation its age, with more than half invested in the market and a quarter in individual stocks, according to the Barron’s Report. reports.

Gen Z has more tools and information at their disposal than any other generation in the business, and they are using itKaty Perry, General Manager, Investor Relations, Public Sector

But while it is a way to pass the time, day trading is a poor way to build wealth for the average person. studies It consistently shows that active traders, even professional ones, outperform investors who use a ‘set it and forget it’ approach.

Evidence has been shown over and over again: Passive investing beats the vast majority of investorsincluding the pros,” James Royle, a former equity analyst, wrote in a Bank article. He urged young investors looking to build money for the long term to consider proven strategies, writing: “The most important of these is the passive approach that takes a long-term perspective.”

“Market timing is always a loser,” wrote Derek Horstmaier, professor of finance at George Mason University, in an article for the Journal. Wall Street Journal.

In the spirit of the times

Not everyone is worried about Gen Z making its way to market. Katy Perry, general manager of investor relations at investment platform Public luck That the “mainstream” conversations about finance and investing can be a powerful driver for young investors.

“Most of your friends have an investing app on their home screen. That’s part of the conversations like it wasn’t,” Perry said. “Part of it could just be keeping up with the culture, which means keeping up with this financial side of life that wasn’t previously in the zeitgeist. .”

Case in point: financial influencers are becoming increasingly popular on TikTok and InstagramAnd 25% of Gen Z investors say social media is one of the sources they use for investment research and ideas, according to new data from Public, which surveyed more than 2,000 retail investors and reviewed historical investment flows.

But social media is not the driving factor when they invest, as nearly the same number of Gen Z investors report using research from brokers and other educational materials from financial institutions and apps. Instead, the report found that Generation Z is more likely than any other generation to use generative AI tools for financial research (at 22%) and to consult with their family and friends.

What this shows is the increasing diversification of financial resources that Generation Z is tapping into to feel confident in their investment strategies, with 71% saying they are confident entering the second half of the year, almost as confident as the Boomers, according to the report. .

Being the most financially connected generation can be a huge advantage to Generation Z. As long as they have the patience to stay in the stock market, their early start can help them avoid this regret most common among Generation Z investors. long wait to invest.

“The optimistic view of this is that Gen Z has more tools and information at their disposal than any other generation entering this phase, and they are using it,” Perry said.

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