Gen Z believes they know more about investing than their parents. But is that really true?

Around 17 million new investors registered on Indian investment platforms such as the National Stock Exchange of India (NSE) between the onset of the pandemic and the end of 2023. Gen Z’s investment appetite is one of the key growth drivers for the Indian economy.

This generation heard a lot about the 2008 financial crisis, experienced the health crisis of 2020 and the economic recession that followed for three years. Indians have experienced a lot more, including the rapid transition to UPI and demonetization. In short, this generation has been through an economic rollercoaster ride.

Undoubtedly, their attitude towards financial management is very different from their parents’ generation. The fundamental difference between the two generations is that while the previous generation focused on essentials and savings, the new generation is focused on wealth creation and early retirement, topped with YOLO (you only live once).

Gen Z is unwilling to compromise their present aspirations for an unguaranteed future. So what do they think about investing, and are they more investing savvy than their parents? Let’s take a look.

The Infovesity Generation

While parents have a significant influence on Gen Z’s financial behavior, the new generation turns to the internet for everything. Social media, podcasts, and tutorials are their resources for getting practical, experience-based advice. Through these platforms, they have been exposed to concepts of smart money management, ESG investing, and diversification.

However, Gen Z has access to an excessive amount of information. This information overload has led to a high level of FOMO (fear of missing out) and a high tolerance for risk.

Higher risk will shift investment decisions toward higher-returning (often riskier) asset classes. This is in stark contrast to what their parents and grandparents would have done. In fact, Gen Z’s predecessors would likely not approve of this investment strategy.

Gen Z is tech-savvy

The younger generation is digital native, so they rely on technological tools to speculate, assess risk and budget. They invest through mobile apps and take advantage of the ability to access them anywhere, anytime. It’s an extension of how they spend.

Gen Z looks into discount codes, reward points, ways to give rewards to those close to them, etc. New investment opportunities with low barriers to entry and innovative methods have expanded the options available.

Gen Z wants to live debt-free

Gen Z doesn’t want to take out huge loans and live in debt. There are tons of videos online that convince people that they should continue to live in their rented accommodation rather than paying decades of mortgages to own a home, plus thousands of extra dollars in mortgage interest. Thanks to interest-free BNPL facilities, this generation is accustomed to convenience, with little to no extra costs.

They know how to save for a vacation without scaling back on their investments. They are frugal and invest in assets that will appreciate in value. Again, this is in contrast to their parents who spent money on cars and homes for themselves and to improve their family’s standard of living. Today’s generation buys properties and then rents them out.

Changes in investment attitudes

Gen Z is the largest mutual fund investor, with 54% of first-time mutual fund investors being Gen Z, while 41% of this generation invest in individual stocks. Surprisingly, previous generations are also leaning towards mutual funds, but they prefer indexes over individual stocks. This shift is the result of online and app-based technological tools that make it easier to make informed decisions. Additionally, Gen Z is less indebted and more focused on wealth creation.

In essence, Gen Z seeks information online, whereas previous generations consulted financial advisors to make informed decisions. So, it’s not about one generation having more knowledge, but rather their attitude towards investing and their financial goals. Moreover, Gen Z wants technology solutions to cater to all their needs, creating a growing demand for cutting-edge platforms that facilitate informed investing.

Gaurav Garg, Director of Business & Customer, BlinkX by JM Financial