When you have questions about your wealth, you often look to the wisdom of older generations. Where do they have their money invested? Are they happy with their asset distribution?
But listening to the wisdom of younger generations can be incredibly valuable. Andrew McDonald, portfolio manager with CIBC Private Wealth, brings on summer interns each year to work with his team.
“I’m mostly in awe with the Zoomers,” he says, “it enhances our work life.”
“We get to see firsthand what’s happening in that generation,” he observes, “whether it’s from disruptors and the way they’re thinking, or just different backgrounds, both domestic and international.”
While Gen Z’s median income currently sits at $32,500, a Bank of America report said Gen Z’s economic power is the fastest growing among the generational groups. The group’s incomes are predicted to hit a combined $33 trillion and surpass millennials’ incomes by 2031.
Gen Z offers fresh perspectives and insight in many areas, such as investing. Taking cues from millennials and Gen Z can benefit your investments in unexpected ways.
Higher-risk and more patience
Times have changed when it comes to investing.
While there used to be more conventional ways of investing your money, now there are more personal approaches that dictate how you handle your wealth.
Candice Dziedziejko, an investment advisor with BMO Nesbitt Burns, observes that now, it’s about looking at an individual’s investment interests and what their risk tolerance is.
“Younger generations, they tend to be more comfortable with this volatility,” she observes.
This ability to ride out the valleys of the market leads to Gen Z seeing greater returns in the long run. “By staying invested, as long as you have great investments, you tend to reap the benefits throughout that volatility by holding on.”
Dziedziejko notes that when the market is volatile, Gen Xers are “more concerned and want to sell out their portfolio.”
Countering this, Gen Z “tend[s] to continue to stick to their plan and invest through that volatility as well as take it as an opportunity or a tool to add more to their portfolio.”
McDonald echoes this feeling. He observes “the Gen Xers… they’re about to become the beneficiaries of the largest transfer of wealth in the history of the world.” This awareness affects their approaches to investing. “I wouldn’t say they’re risk averse. But I think it’s still controlled risk.”
Different ages, different worries
Part of the reason for Gen Z’s greater risk tolerance may be due to teachings from older generations. Dziedziejko theorizes that younger investors may grow up hearing about the market’s volatility from other people directly or from the media.
From Dziediziejko’s personal experience, even millennial investors are showing less risk tolerance in recent years. She suggests this may be due to their feeling they have less time to invest before retirement.
Gen X in particular may feel like they have a shorter window of opportunity, which will lead to less risk tolerance.
“And they feel as though they’re less comfortable as retirement approaches with this volatility, where they really could learn from the younger generations by just investing through the volatility and being rewarded more handsomely in time.”
Think differently for bigger payoffs
Changes to traditional approaches to finances are part of everyday life for Gen Z.
McDonald says that looking beyond convention ”goes to the very core of what [Gen Z’ers] are. A little bit more risk taking… I think it’s forming those biases that should be malleable, rather than being a permanent state.”
Disruption is a symptom of the gig economy that permeates Gen Z’s lives. “Disruption” refers to changes in the traditional way of doing business, such as the way Airbnb added new competition for hotels.
“There’s lots of choices,” notes McDonald, adding that disruption “is like a permanent thing that’s occurring.”
“Look at what you’re doing, or when you look at an opportunity, can it be disrupted?” advises McDonald. “Can you double down and reinvest in it?”
McDonald notes that Gen Z is still interested in traditional companies to invest in, but also want to explore alternative avenues. For instance, in Q4 2021, Tesla was the top stock held by Zoomers, while shares in companies like Roblox and Meta Platforms Inc. rose in popularity.
Pay attention to the world around you and ask questions
“There is value in listening,” says McDonald. “I love interacting with Gen Z’s for that.”
Gen Z has grown up with technology and change all around them, and have come to embrace a certain healthy paranoia.
McDonald recognizes this, commenting that “understanding innovation, and the fact that innovation is very important” is key to recognizing investment opportunities, such as the rise of Uber.
“You don’t want to become obsolete.”
When it comes to investing, Dziedziejko observes that “the savviness of these individuals is much more elevated than I had seen years ago.”
“Be it due to social media, be it due to information being more transparent from a global perspective through our news outlets, or just their level of interest. But I would say they tend to ask more thoughtful questions and have a better general understanding of investing, even just walking through the door.”
Gen Z offers a fresh perspective on investing. By taking cues from their habits and listening to their insights, you can revise your own investment strategy and refresh your portfolio — creating new opportunities for financial growth.
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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.