Ranked: The 5 Most Popular Investment Products for Millennials and Gen Z

There are many ways you can invest your money, from traditional options like stocks and mutual funds to more recent options like cryptocurrency. In all likelihood, your age will play a large role in which investments you choose. Younger and older generations each have their own preferences in investment products.

The Motley Fool recently researched investing habits of Gen Z and millennials to see which investments they like the most. Here's what it found and how to choose the right investments for your portfolio.

The five most popular investment products for millennials

Here are the most popular investments for millennials and the percentage who own each one:

1. Stocks: 55%
2. Retirement accounts: 47%
3. Cryptocurrency: 43%
4. Mutual funds: 33%
5. Bonds: 28%

Millennials are open to a variety of investments. They had the highest ownership rates of 7 out of 9 investment products. That's probably in part because they started investing around the same time that zero-commission trading became the norm, providing the opportunity to invest in anything at an affordable cost.

The stock market has historically grown at a rate of about 10% per year. Investing in stocks, whether individually or in investment funds, is a smart decision. Millennials, to their credit, are the most likely to invest in stocks. They're also the most likely to invest in crypto, a high-risk asset and not a good place for all but a small portion of your money.

While some millennials may be investing more than they should in crypto, the biggest issue is that only 47% are using retirement accounts. These are a must, because they help you save on taxes. Even if you don't have the option of a 401(k), you could still open an individual retirement account (IRA).

The five most popular investment products for Gen Z

Here are the most popular investments for Gen Z and the percentage who own each one:

1. Stocks: 37%
2. Retirement accounts: 36%
3. Mutual funds: 26%
4. Cryptocurrency: 22%
5. Options: 18%

Many members of Gen Z haven't started investing yet. That's to be expected, since none of them have even reached age 30, but it's also a costly mistake. Even if you can't invest a lot as a young adult, it helps to invest something. The younger you are when you start investing, the more time your money has to grow.

Gen Z is also the least likely to have retirement accounts. Once again, this is understandable. A large portion probably doesn't have access to a workplace retirement plan yet. But anybody who is working can open an IRA and start making tax-deductible contributions. Another option is a Roth IRA, which will allow for tax-free withdrawals in retirement (but contributions aren't tax deductible).

Which investment products should you have in your portfolio?

Every investor should have at least one retirement account. If your employer offers a 401(k), make sure to take advantage. An IRA is another good option, whether you already have a 401(k) or not. Retirement accounts have early withdrawal penalties if you take out money before you're 59 1/2, but they're still worth using because of the tax savings they offer.

You might also want to open a regular brokerage account, so you have investments you can access without an early withdrawal penalty. But for most investors, it makes sense to fund retirement accounts first for their tax benefits.

As far as what to buy, stocks are one of the best options because of their growth potential. Keep in mind that you don't need to invest in stocks individually. Mutual funds and exchange-traded funds (ETFs) are also popular options. They invest in a large number of stocks for you, so you don't need to build an entire portfolio yourself.

You might want to invest in bonds, since these are a stable, fixed-income investment. Some investors also like to put money into real estate investment trusts (REITs) or crypto. While there's nothing wrong with having a diverse mix of assets, stocks are normally the backbone of a strong investment portfolio.