Risk-takers or safety seekers: Deep dive into Gen Z investment trends (2024)

New Delhi,UPDATED: Sep 3, 2024 17:52 IST

Imagine being on a thrilling roller coaster, where every twist and turn brings both excitement and a bit of apprehension. For Generation Z (Gen Z), the world of investing feels much the same.

This generation, often labelled as digital natives, is reshaping how and where they put their money. Balancing the excitement of high-risk investments like cryptocurrencies with the safety of mutual funds,

Gen Z is making its mark in the financial world. Unlike their predecessors, who preferred the steady path of traditional investments, Gen Z is more willing to take calculated risks that align with their ambitions.

But are they truly daring thrill-seekers or cautious strategists? Let's dive into their financial habits and uncover what drives their investment decisions.

Gen Z and investments

According to a report by a Chartered Financial Analyst (CFA), 55% of cryptocurrency investors are Gen Zs. Additionally, 41% of investments in stocks and 25% of investments in NFTs are made by Gen Zs.

Swati Saxena, Founder and CEO, 4Thoughts Finance said that this indicates a strong inclination towards high-risk, high-reward investments among this generation.

However, their approach is not just about chasing quick gains. By diversifying their portfolios, Gen Zs spread their risk and potentially increase their returns, making the most of today’s fast-changing financial landscape.

Gen Z is investing differently compared to millennials in several ways. While 54% of first-time investors in mutual funds are Gen Z, 41% prefer investing in individual stocks.

Unlike previous generations, who leaned more towards mutual funds and indices, Gen Z is more focused on individual stocks, thanks to online platforms and apps that make informed decision-making easier.

With fewer financial liabilities, Gen Z is focused on building wealth for life milestones such as starting businesses, funding higher education, and achieving financial independence earlier in life. Their investments reflect their values, favouring flexibility, liquidity, and growth potential.

Is Gen Z going for riskier investments?

"Gen Zs are willing to take risks if it means a chance for swift gains. However, they are not reckless gamblers. They understand the dangers of letting emotions like greed and fear drive their decisions. Instead, they take calculated risks to achieve their financial goals, blending bold choices with careful planning," said Saxena.

Mutual funds are the most common investment among Gen Z, with 54% of first-time mutual fund investors belonging to this generation, according to a study by Computer Age Management Services (CAMS).

Out of the 1.60 crore new mutual fund investors in the last five years, nearly 85 lakh were Gen Z. While mutual funds remain popular, many in this generation also explore alternatives like cryptocurrencies, NFTs, and other digital assets, looking for opportunities where they can gain either in the short or long term.

Gen Z's relation with traditional investment instruments

Though Gen Z is known for exploring new-age investments, they haven’t completely turned away from traditional instruments like Public Provident Funds (PPFs) and Fixed Deposits (FDs).

"These fixed-income sources provide them with peace of mind and a stable income stream, allowing them to plan for long-term goals such as higher education, starting a business, or even starting a family. However, real estate is often avoided due to high entry costs, making it less attractive compared to other investment options," added Swati Saxena.

Where should Gen Z invest?

Most Gen Zs were born in an era of rapid technological innovation. With artificial intelligence (AI) now becoming mainstream, investing early in AI-driven companies could result in significant gains.

Saxena further said that another promising area is sustainability, and sectors like electric vehicles (EVs), renewable energy (solar, wind, hydro), and biotechnology are growing rapidly.

"These investments not only support the movement towards a cleaner and greener planet but also promise monetary benefits in the long run. However, investing in some of these sectors may require deeper pockets and patience before returns start flowing in," she added.

(Disclaimer: The views, opinions, recommendations, and suggestions expressed by experts/brokerages in this article are their own and do not reflect the views of the India Today Group. It is advisable to consult a qualified broker or financial advisor before making any actual investment or trading choices.)