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How Gen Z Is Reshaping the Investing Landscape

A new study conducted by Nasdaq, in partnership with Morning Consult, reveals that the profile of the traditional retail investor has shifted as younger generations, specifically Gen Y and Gen Z, have become more active.

Over the past couple of years, retail investors have flooded into the market. However, a new study conducted by Nasdaq, in partnership with Morning Consult, reveals that the profile of the traditional retail investor has shifted as younger generations, specifically Gen Y (or millennials) and Gen Z, have become more active, looking beyond traditional investments for alternative options to grow their money.

The study highlights the differences between generations and exposes the risk of using a one-size-fits-all approach when appealing to retail investors. While Gen X and baby boomers will continue to be a prominent client base, the emerging influence of Gen Z and the growing earning power of Gen Y are introducing new opportunities in a highly competitive market. Younger generations are taking a proactive approach to managing their portfolios, conducting their own research before buying and selling and making more trades.

Investors by generation making trades a few times a week

Notably, the study found that younger investors seek more accessible options to grow their money, including exchange-traded products (ETPs), options and cryptocurrencies.

Regarding ETPs, retail investors across generations said they are aware of ETPs, although younger generations expressed higher levels of familiarity than the older generations.

How familiar are you with ETPs?

That said, most investors have only a surface-level understanding of the concepts that could help to make a good decision. While a majority said they often consider expected and historic performance (80%), as well as price and investment objective (each at 77%), they don’t often consider Sharpe ratio, tracking error and standard deviation. Even trading strategies are mixed, with 25% of ETP retail investors indicating that they were unfamiliar with the various options, such as using limit orders to manage pricing volatility.

Younger investors, however, are devoting more time to researching potential investments, leveraging a variety of sources to make informed decisions. According to the survey, 40% of Gen Z respondents said they spend at least an hour researching, and 30% reported spending at least a day, but less than a week, researching. That’s nearly double the amount of time that Baby Boomers dedicate to research.

While all generations rank financial advisors as trustworthy sources for information, the majority of Gen Y and Gen Z investors also view online discussion boards, such as Reddit, podcasts and social media as credible sources for financial advice. As the survey noted, for those that use social media, YouTube and Facebook were the most popular applications.

How trustworthy do you consider each of the following when making an investment decision?

“The role of financial advice, education and guidance has never been more important as they look to alternative assets beyond the traditional stocks and mutual funds,” the report said. 

Read the full report.

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