Millennials (born 1981 to 1996) and members of Generation Z (born 1996 to 2012) can more easily access the stock market and other investments than any previous generation.
So what are they investing in?
In October 2022, The Motley Fool surveyed 1,200 investors about the types of investments they own, what types of stocks they own, which sectors of the economy they're invested in, and what factors they consider when determining whether to buy a stock.
We also surveyed investors outside of these generations to see where younger investors differ from previous generations.
Key findings
- Almost 60% of Gen Z and millennial investors own cryptocurrency and/or stocks, with crypto edging out stocks as the most popular investment.
- Gen Z and millennial investors are more likely than previous generations to own stock options and cryptocurrency, but less likely to have a retirement account.
- Millennials are more likely to hold exchange-traded funds (ETFs) and mutual funds than members of Gen Z, while the younger group is more likely to hold stock options.
- 40% of Gen Z and millennial investors hold meme stocks in 2022, compared to 30% in 2021.
- Gen Z and millennial investors prioritize the potential for long-term gains when picking stocks, but disagree on the importance of historical performance.
Crypto is the most-held asset among Gen Z and millennial investors
When we asked investors if they held crypto in 2021, 40% said yes. This year, almost 60% of investors under the age of 42 (the top end of the range of millennial ages) say they do. That's a huge jump in just a year. There's no doubt that crypto is on the rise, and continued legislation may actually be great for the industry.
Here are the assets Gen Z and millennial investors say they hold in 2022:
| Type of investment | Gen Z investors with this type of investment | Millennial investors with this type of investment | Total |
|---|---|---|---|
| Cryptocurrency | 54% | 60% | 59% |
| Stocks | 60% | 56% | 57% |
| 401(k), 403(b), or other retirement account | 28% | 44% | 41% |
| Stock options | 33% | 29% | 30% |
| Bonds | 24% | 25% | 25% |
| Mutual funds | 18% | 27% | 25% |
| Real estate | 30% | 23% | 25% |
| ETFs | 14% | 25% | 22% |
| Index funds | 17% | 22% | 21% |
| Fractional shares | 13% | 21% | 20% |
| IPO shares | 11% | 16% | 15% |
| Other | 0% | 1% | 1% |
Gen Z and millennial investors are more likely than other generations to own stock options (30% for Gen Z and millennial investors vs. 18% for previous generations) and cryptocurrency (59% vs. 48%, respectively), but less likely to have a retirement account (41% vs. 55%).
44% of millennials report having a retirement account, compared to 29% for members of Gen Z.
| Generation of investor | Investors with a retirement account |
|---|---|
| Gen Z | 29% |
| Millennial | 44% |
| Previous generations | 55% |
While it's good to see that younger investors are getting into the stock market, using a tax-advantaged retirement account is one of the best ways to build wealth over time. And Gen Z and millennial investors could take better advantage of it.
Millennial investors lean more toward funds than Gen Z investors
While Gen Z and millennial investors report similar percentages for most types of investments, the two greatest differences are in ETFs and mutual funds, both of which millennials are invested in at a much higher rate than members of Gen Z.
Investors from the younger generation are more likely than millennials to hold stock options, though the disparity isn't as large as that in ETFs and mutual funds.
| Generation of investor | Investors with ETFs | Investors with mutual funds | Investors with stock options |
|---|---|---|---|
| Gen Z | 14% | 18% | 33% |
| Millennials | 25% | 27% | 29% |
Gen Z and millennial investors emphasize value, growth, and dividend stocks
We've seen that over half of Gen Z and millennial investors own individual stocks, but what specific types of stocks are they buying?
Unsurprisingly, value, growth, and dividend stocks lead the way:
| Type of stock | Gen Z investors with this type of stock | Millennial investors with this type of stock | Total |
|---|---|---|---|
| Value stocks | 57% | 60% | 59% |
| Growth stocks | 59% | 57% | 58% |
| Dividend stocks | 53% | 57% | 56% |
| Penny stocks | 49% | 50% | 50% |
| Small-cap stocks | 38% | 45% | 44% |
| IPO stocks | 44% | 43% | 43% |
| Large-cap stocks | 41% | 43% | 43% |
| Blue chip stocks | 35% | 41% | 40% |
| Meme stocks | 37% | 40% | 40% |
| REIT stocks | 30% | 36% | 35% |
| SPAC stocks | 37% | 40% | 34% |
| ESG stocks | 35% | 32% | 33% |
Penny stocks, which 41% of Gen Z and millennial respondents owned in 2021, are up to 50% in 2022. Meme stocks went up from 30% in 2021 to 40% in 2022, as well.
Gen Z and millennial investors are more likely to own ESG, penny, SPAC, IPO, and REIT stocks than previous generations. This could indicate a tendency to diversify more than previous generations, but it's also worth noting that previous generations are more likely to have mutual funds and retirement funds, which can also provide diversification.
Investors under the age of 42 (the top end of the range we used to classify millennials) are also significantly more likely to own meme stocks than older generations (40% vs 17%).
Finance and technology dominate younger investors' portfolios
Where are Gen Z and millennial investors putting their money? According to The Motley Fool's survey, pretty much the same places as everyone else: finance, energy, real estate, and technology.
| Sector | Gen Z investors with stock in this sector | Millennial investors with stock in this sector | Total |
|---|---|---|---|
| Financial | 39% | 33% | 35% |
| Energy | 36% | 32% | 33% |
| Real estate | 37% | 32% | 33% |
| High-tech/emerging technology | 37% | 32% | 33% |
| Information technology | 25% | 33% | 31% |
| Healthcare | 33% | 29% | 30% |
| Marijuana | 23% | 26% | 25% |
| Utilities | 23% | 24% | 23% |
| Industrial | 22% | 23% | 22% |
| Communication | 22% | 20% | 21% |
| Consumer staples | 13% | 19% | 18% |
| Consumer discretionary | 10% | 16% | 15% |
More about stock market sectors
This survey shows no big differences between Gen Z and millennials' investment sectors and those of previous generations.
It's worth noting, however, that consumer staples and discretionary stocks are quite a bit lower than in the 2021 survey, possibly because of inflation's impact on these sectors. Energy and real estate, on the other hand, are generally seen as quite safe.
Marijuana stock ownership jumped from 20% to 25% of Gen Z and millennial respondents between 2021 and 2022, showing the generations' interest in the growing sector.
Most investors have more than 15 different stocks or funds
Among those who own stocks or funds, one-fifth own shares in five or fewer stocks or funds, but over half hold shares of more than 15 different stocks or funds.
| Number of stocks/funds owned | Gen Z investors with this many stocks/funds | Millennial investors with this many stocks/funds | Total |
|---|---|---|---|
| 1–5 | 18% | 20% | 20% |
| 6–10 | 22% | 13% | 15% |
| 11–15 | 14% | 11% | 12% |
| 16–20 | 13% | 16% | 15% |
| 21–25 | 14% | 14% | 14% |
| 26–30 | 10% | 14% | 13% |
| 31+ | 10% | 12% | 11% |
Members of Generation Z are most likely to have six to 10 stocks or funds, while millennials are most likely to have between one and five.
Previous generations show a very similar pattern, with one quarter holding shares in five or fewer stocks or funds.
When asked how many stocks a high-performing portfolio should have, most respondents across generations give an answer somewhere between six and 20. This is still fewer than the 25 or more recommended by The Motley Fool's investing philosophy, but it's good to see that investors of all ages are hoping to accrue shares of more companies and funds.
Gen Z and millennial investors want to know the companies they buy into
Now that we have a better idea of what investors under 42 are buying, let's dig into why.
We asked respondents to rank seven factors that could go into an investment decision to see if Gen Z and millennial investors look for different things than previous generations' investors.
In general, these factors are fairly similar between generations:
| Priority | Gen Z investors | Millennial investors | Previous generation investors |
|---|---|---|---|
| Highest | Potential for long-term gains | Potential for long-term gains | Potential for long-term gains |
| Knowledge of the company | Historical performance | Knowledge of the company | |
| Knowledge of the industry | Knowledge of the company | Historical performance | |
| Potential for short-term gains | Knowledge of the industry | Knowledge of the industry | |
| ESG factors | Dividends | Dividends | |
| Dividends | Potential for short-term gains | Potential for short-term gains | |
| Lowest | Historical performance | ESG factors | ESG factors |
Knowledge of the company being invested in and the potential for long-term gains are two of the most important factors to all investors across generations, while historical performance, industry knowledge, and dividends are less agreed upon.
It's worth noting that none of the factors listed above are ranked significantly lower or higher than the others. For example, dividends and historical performance received almost the exact same average rank from Gen Z and millennial investors.
However, if this pattern continues into the future, we could see a stronger push for ESG stocks from members of Gen Z.
Crypto, stock options, and stocks lead the list of risky investments
Investors across generations have similar perceptions of risk when ranking different types of investments:
| Perceived risk | Gen Z investors | Millennial investors | Previous generation investors |
|---|---|---|---|
| Highest | Cryptocurrency | Cryptocurrency | Cryptocurrency |
| Stock options | Stocks | Stocks | |
| Stocks | Stock options | Stock options | |
| Index funds | IPO shares | IPO shares | |
| Mutual funds | ETFs | ETFs | |
| IPO shares | Bonds | Index funds | |
| ETFs | Mutual funds | Real estate | |
| Real estate | Index funds | Mutual funds | |
| Lowest | Bonds | Real estate | Bonds |
Cryptocurrency tops everyone's list of investments by risk – an interesting finding given that it is also the most popular investment among Gen Z and millennial respondents.
Beyond that, perceived risk mostly follows established rules of thumb, with stocks and options higher than funds. Bonds and real estate are ranked as having low perceived risk. (Of course, just because it's a rule of thumb doesn't mean that it's true. Investing risk is quite complicated.)
Outside experts weigh in
Reena Aggarwal
Our survey found that 33% of Gen Z and millennial investors own ESG stocks. However, when asked about what respondents consider their top priorities when deciding where to invest, ESG factors ranked towards the bottom. Why do you think this may be?
Part of the issue is how to define ESG stocks. Is Tesla an ESG stock? It was removed from the S&P 500 ESG Index, meanwhile ExxonMobil is still in the index. I teach a course on ESG Investing at Georgetown, where I polled MBA students and asked them whether they considered Tesla and ExxonMobil ESG stocks; the results are interesting. 19% of respondents do not consider Tesla an ESG stock, whereas 50% of respondents do not consider ExxonMobil an ESG stock.
Although Gen Z and millennial investors agree that cryptocurrency is the riskiest investment, the asset has actually grown in popularity among young investors over the past year (60% report owning crypto now, compared to 40% in 2021). What factors might be at play when it comes to younger investors buying an asset they believe to be the riskiest, especially during the current economy?
These investors are willing to take huge risk in the hopes of earning a huge payoff. During COVID, they saw the price of Bitcoin go up a lot, and now there has been a correction. Many are assuming that prices will go up a lot again.
Dr. Jimmie Lenz
Although Gen Z and millennial investors agree that cryptocurrency is the riskiest investment, the asset has actually grown in popularity among young investors over the past year (60% report owning crypto now, compared to 40% in 2021). What factors might be at play when it comes to younger investors buying an asset they believe to be the riskiest, especially during the current economy?
This is an interesting question, asked from a perception of risk that may not be as widely shared as you would imagine. I’ve detailed the fact that Millennial’s are more financially conservative than previous generations in several articles, based on their behavior, in particular related to debt and savings. So what may be at work here is a difference in the way that the risk that this asset class is perceived to have. With regard to the current economy, keep in mind that Bitcoin was born in an economic downturn, and has grown quite exponentially since, along with other cryptocurrencies.
Penny stocks and meme stocks have grown in popularity among Gen Z and millennial investors over the past year - 50% of young investors say they own penny stocks, up from 41% in 2021; 40% say they own meme stocks, up from 30% in 2021. Why do you think these types of stocks have increased in popularity among these generations?
I believe this is twofold; first is availability, apps like Robinhood have made it extremely easy to put a small amount of money into these types of stocks very easily. In the case of meme stocks, keep in mind the genesis of this movement, squeeze short sellers (by pushing up prices of more thinly traded stocks) to the point where they have to cover at high prices. This nets the meme stack buyers a nice profit and punishes the short sellers, often hedge funds and the like.
According to our survey, millennial and Gen Z investors were more likely than other generations to own stock options (30% - 18%) and cryptocurrency (59% - 48%), but less likely to have a retirement account (41% - 55%). What would you attribute the lack of investing in retirement to?
Let's take this apart, these groups tend to be more educated than previous generations, I would expect this leads to a better understanding of things like derivatives (options) and the leverage they afford. The same goes for cryptocurrencies, they are more comfortable with the technology, the idea of electronic “money” and can see uses that previous generations are clueless of. I wonder how many in the group you polled have ever written a check for example, while previous generations are still wedded to this anachronism, at least in the US. As for retirement accounts, I think you’ll find, if you compare previous generations at the same age, that Millennial’s have actually saved more.
Our survey found that 33% of Gen Z and millennial investors own ESG stocks. However, when asked about what respondents consider their top priorities when deciding where to invest, ESG factors ranked the lowest. Why do you think this may be? Are younger investors just happening to buy ESG-related stocks based on other priorities, such as knowledge of the company or potential for long-term gains?
While ESG is likely a consideration, it is only that, one factor in a larger consideration. My guess is that they see longer term prospects are better for companies that can adapt and sometimes radically change to meet the demands of regulators, the public, and shareholders.
Gen Z and millennial investors are savvy, but should consider shifting priorities
Survey results show that investors under the age of 42 have a solid grasp of risk, important factors in choosing investments, and different market sectors. The Motley Fool wants as many people as possible to get invested in the stock market, so the fact that over half of our investor respondents hold individual stocks is great.
The finding that could be worrying is the lower use of retirement accounts among Gen Z and millennial investors compared to previous generations. Of course, many of these investors are still young (our survey included investors down to the age of 18). And saving for retirement probably isn't as big a priority for them as it is for our respondents in their 30s and 40s.
However, it's never too early to start using a tax-advantaged retirement account and the power of compound interest means that even a small start early on is better than waiting.
Methodology
The Motley Fool distributed this survey to 1,200 American adult investors via Pollfish on October 13, 2022.
Respondents were 44% female and 56% male.
