Gen Z investors sway harder to the beat of rising inflation and higher interest rates than their older peers. But passive investing beats pro trading, says an analyst.
Gen Z outpaces all other age groups in active stock trading, according to a Bankrate survey.
However, a Bankrate analyst says they should become more passive investors.
Gen Z investors aren’t just bailing out of the market either. They are also more likely to buy stock than other groups.
In a year marked by high inflation and interest rates, Gen Z has emerged as the group most likely to be active on the stock market.
But that isn’t the best play, according to one analyst.
“The evidence has been shown over and over again: passive investing beats the vast majority of investors, including the pros,” wrote Bankrate analyst James Royal in an article published Saturday.
“While you may be tempted to sell for any number of reasons, such as market volatility, you need to remain a passive investor if you want to earn the index’s long-term return,” he wrote.
His advice was aimed at younger investors — nearly 9 in 10 Gen Z investors surveyed said they actively traded stocks in 2023 in response to high inflation and interest, according to a Bankrate survey published in May. 3,676 US adults responded to the survey conducted in April.
This level of trading activity was more than any other group. In comparison, only 35% of baby boomer investors say they actively traded in the same period, while only 2 in 3 millennial investors said they did so.
The same survey notes that Gen Z investors aren’t just bailing out of the market. In fact, they are more likely to buy stock than other age groups.
Over half, or 53%, of Gen Z investors said they expect to invest in stock-related investments in 2023, compared to just 19% of Gen X investors and 9% of baby boomer investors.
A previous survey suggests that the fear of missing out, or FOMO, might play a role.
Over 40% of Gen Z investors in the US, Canada, and the UK cited FOMO as a major factor behind their decision to start investing, according to a survey by the CFA Institute and the Financial Industry Regulatory Authority Investor Education Foundation, published in May.