According to data from Motley Fool and Bank of America, 59% of Gen Z investors claim that the cost of living crisis is the main barrier to investing. Moreover, 45% have reported not having sufficient funds and 39% blame the UK economy. Investment platform Saxo has analysed survey data and report data from Drapers and Remake to discover Gen Z spending and investment habits.
What are the Gen Z Investment habits, and how do they compare to millennials?
Although Gen Z on the whole claim to be environmentally conscious on social media/as a generation, when it comes to investing over actual purchases, the evidence shows it is not a priority. The results showed that Gen Z are less interested in quality, price and convenience than millennials but care more about brand name and ability to resell.
The data also suggests that at least 8% of Gen Z respondents are borrowing and investing at the same time, whilst only 29% have a retirement account.
When Gen Z invests, stocks (60%) and cryptocurrency (54%) are currently the most common investment type. Interestingly, growth stocks (59%) and value stocks (57%) tend to be their preferred type of stocks.
Peter Siks, Investor Trainer at Saxo suggests Gen Z is missing out on a key asset: “When making investment decisions, Gen Z should ensure they are aware of the differences between the return on stocks (around 9% for the S&P 500) as opposed to savings (around 3%) in the long term,” he said.
The importance of ESG factors in investment choice
When making purchasing decisions, Gen Z investors rank ESG qualities highly on their list of considerations, with over half (51%) saying how a brand’s environmental sustainability, ethical trading, equality, and diversity have become more of a factor in how they buy clothes, accessories, and shoes over the last 12 months.
Conversely, a quarter (26%) of millennials admitted they would not pay more for sustainable and ethical clothing, accessories or shoes.
Over a third (46%) of Gen Z said they abandoned or decided against a fashion purchase because they felt that the brand or retailer didn’t reflect their values on sustainability, ethics, equality or diversity. Environment and ethical sustainability aren’t a high priority for Gen Z investors. In fact, they only rank sixth and seventh coming below style, quality and convenience and speed.
“The hard thing about ESG investing is assessing the level of sustainability of that investment,” Siks said. “To put it simply: there are traditional investments, light green, green and dark green (impact investing) investments. Gen Z will find out that the more sustainable one will give the same return as the traditional. The intention is there but in the execution there is not a clear cut moment of choice where the two alternatives are compared.”
When it comes to the highest scoring companies based on the above criteria, fast fashion (H&M Group, Fast Retailing, Zalando) and sports shoes makers (Puma, Adidas Group, Nike) dominate the top 10. That being said, they fail to surpass luxury brand Burberry (38) or Levi’s Strauss & Co. (34) which happen to be among the most traded stocks by Gen Z.
What next, or the future of investment?
In late 2022, nearly half (44%) of Gen Z people that don’t invest said they couldn’t due to lack of additional funds to spare.
When picking investments, Gen Z investors adopt a low risk approach by prioritising long term gains over short term gains. Currently, the most common sector for investment is financial (39%), with real estate (37%) and high-tech/emerging technology (37%) second and third respectively.
When turning attention to the future of investment, Siks states, “Boring, long term investments are the new sexy, and after applying this insight, they will thank themselves when they retire. This also counts if small amounts of money are monthly invested: 35 years of $100 a month and an average return of 7% will earn $172K (not inflation adjusted and before taxes).”
