By Thomas Kostigen
We’re often told to listen to our elders, abide their wisdom, and to follow their lead. But we may want to do the opposite — and follow the charge of the younger generation, especially when it comes to making investments.
Younger generations are shaping the future, and that’s what we ought to be investing in.
Gen Z — those born in the mid-1990s, or the generation succeeding millennials — is already having a huge impact on the economy as it enters the workforce. It’s causing major changes to the way credit is issued, as well as to how investments are made.
“Gen Z’s fervent social activism is sometimes mistaken for socialism, but in reality, the youngest Americans are proving incredibly adept at using the free market to their advantage,” reports GoBankingRates.com. It’s all about taking a digital approach to traditional business means.
Take, for example, investing apps, online communities, peer-to-peer lending clubs, and cryptocurrencies. These are all part and parcel in the Gen Z arsenal of finance. The theme? Decentralization, or empowering the individual and/or communities over institutions. This power will only be amplified as time goes on: Gen Z’s total income is forecast to increase five times, to $33 trillion within a decade. That will make their earning power a whopping 25 percent of global GDP, and putting them in the top position of wealth and financial power in the next decade. Worth watching, I’d say. And it should also be noted that Gen Z is the recipient of the much ballyhooed, largest wealth transfer in history, which amounts to $78 trillion.
When it comes to investing, Gen Z follows the millennial generation in opting for companies that embrace environmental, social and governance (ESG) practices. Indeed, nearly 20 percent of Gen Zers strictly invest in these stocks. As their wealth grows, it’s forecast, so too will their investments in the ESG sector.
Still, much of their investment activity is activated through online community groups such as Reddit or Discord. (A note to financial advisors, these are the places where Gen Z investors discusses and advise one another on investment opportunities, often with a social agenda.)
The case of GameStop is proof of Gen Z’s investment power. A group of these investors banded together to disrupt several large hedge funds shorts in the stock. It minted profits for the disrupters and stuck it to the big, institutional hedge funds who held those short positions.
Influencers on Tik Tok and Instagram also can promote investment activity that goes against conventional wisdom. (It’s worth watching and learning who holds influence and what they are promoting or criticizing.)
A large part of Gen Z interest and sway has to do with media creation. It also forms the backbone of their career interests, and much of that is freelance or remote work. This may be why online hubs such as Upwork are seeing huge gains in membership (as well as stock price).
In short, Gen Zers are keen on social change. The opportunities that involve activism and put earning and investing power into individuals’ hands — over the governments and legacy institutions’ — will be the clear winners in the near future.
Invest in those opportunities and you’ll be following the lead of tomorrow’s arbiters of success.
Thomas Kostigen is a contributing writer to MyPerfectFinancialAdvisor, the premier matchmaker between investors and advisors. Thomas is a best-selling author and longtime journalist who writes about environmental, social, and governance issues.