Investing in 2023: A Comprehensive Guide for the Gen Z Investors

The likes of cryptocurrency, blockchain and meme stocks have presented many new options for investors in 2023. With this in mind, the team at Saxo decided to analyse survey data from The Motley Fool and Bank of America, and report data from Drapers Annual Consumer Research report and the Remake Fashion Accountability report, to discover the spending and investment habits of Gen Z.

The data found that stocks (60%) were the most common investment type for Gen Z, and when looking at types, growth stocks (59%) and value stocks (57%) tended to be their preferred type of stocks. While the general cryptocurrency market suffered in 2022, crypto was the second most common investment type. In fact, 54% of Gen Z said they have invested in cryptocurrency.

The data also looked into the main barriers holding back investors - 59% of Gen Z investors claim that the cost of living crisis is the main inhibiting factor and 20% feel investing is risky. Moreover, nearly half (45%) reported not having sufficient funds and 39% blame the US economy.

Investing Habits of Gen Z

Gen Z often claims to be environmentally conscious on social media, but the evidence shows it is not a priority when it comes to investing. The results showed that Gen Z is less interested in quality, price and convenience than Millennials, but care more about brand name and ability to resell.

Overall, Gen Z wants to invest and make smart choices in their investments to ensure long term success, and prepare for their futures. When making investment decisions, some aren't researching macro trends, and don't have retirement plans, only 29% of the respondents have a retirement account, suggesting that Gen Z is either less willing or less able to set one up.

The data suggests that at least 8% of Gen Z respondents are borrowing and investing at the same time. When it comes to paying off any potential debt, over 50% of Gen Z would rather sacrifice chocolate and pizza for a year than babysit for a week or give up their phones for a month to help clear debt.

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.”

The importance of ESG factors in investment choice

When making purchasing decisions, Gen Z investors rank Environmental, Social, and Governance (ESG) qualities highly on their list of considerations, with over half (51%) saying how ethical trading, equality, diversity, and a brand's environmental sustainability have become more of a factor in how they buy clothes, accessories, and shoes over the last 12 months. 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.  This 51% of Gen Z outnumbers the 26% of Millennials who admitted they would not pay more for sustainable and ethical clothing, accessories or shoes.

However, 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.

When looking at ESG factors and investing, Peter Siks says:

“The hard thing about ESG investing is assessing the level of sustainability of that investment. To put it simply: there are traditional investments, light green, green and dark green (impact investing) investments.

“The lack of ESG-proof investments has to do with the lack of a clear choice between a traditional investment (in an ETF) versus the sustainable alternative.

“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 2 alternatives are compared.”

What Next? The Future of Investment

In late 2022, nearly half (44%) of Gen Z who didn't invest said they couldn't due to limited funds.

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, “With predicting long term macro trends, even the brightest minds have failed. So, it is wise to take a bet on a macro trend with a limited sum of money.

“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).”

Methodology

Source links:
BofA: Gen Z’s Financial Priorities, Barriers & The Path Forward

MotleyFool: Study: What Are Gen Z and Millennial Investors Buying in 2022?

Remake Report: 2022 Remake Fashion Accountability Report

Drapers Report: Gen Z and Millennials 2022 report

Data was gathered from the above source links, cleaned and analysed. The findings were used as the basis for our campaign that aimed to provide Gen Z with investment advice/tips for 2023. Data accurate as of December 2022.