Investment Strategies Across Generations

Investment Strategies Vary by Generation

Investment strategies differ across generations, with younger generations showing a propensity for experimenting with a variety of approaches. This information is depicted in a graphic by Kayla Zhu of Visual Capitalist, which illustrates the investment strategies employed by different generations. These strategies include: - Buy and hold: This strategy involves purchasing stocks or assets and retaining them long-term, regardless of short-term market fluctuations. - Growth investing: This involves investing in companies expected to grow at an above-average rate, despite their high stock prices. - Fractional shares investing: This allows investors to buy a portion of a full share, enabling them to invest in expensive stocks with less money. - Short-term trading: This strategy involves buying and selling assets quickly, typically within days or weeks, to take advantage of short-term market movements. - Direct indexing: This method involves buying and owning individual stocks of an index directly rather than through a mutual fund or ETF, providing greater customization and tax efficiency. - Socially responsible investing: This strategy involves investing in companies that meet specific ethical, environmental, or social criteria. - Robo-advisor investing: This is an automated investment service that uses algorithms to manage and optimize an investor’s portfolio, typically with low fees. - Thematic investing: This strategy focuses on investing in companies linked to specific trends or themes, such as clean energy or technological innovation. The data is derived from a Charles Schwab Modern Wealth survey of 1,000 U.S. adults and is current as of March 2024.

Buy and Hold Strategy Preferred by All Generations

According to the survey, the buy and hold strategy is the most popular across all generations. Boomers rely on this strategy the most (60%), while Gen X relies on it the least (48%). Younger generations, specifically Gen Z and Millennials, tend to adopt a wider range of investing strategies than older generations. They use newer investing strategies more frequently, including fractional shares investing (48% for both) and short-term trading (52% for both).

Technology and Social Media Influence Younger Generations

Younger generations also use technology-driven strategies like robo-advisor investing more than their older counterparts. Robo-advisors are online investing platforms that use algorithms to create and manage investment portfolios, such as Betterment and Wealthsimple. Younger generations are also increasingly using social media to inform their financial decisions. The Charles Schwab survey reveals that 72% of Gen Z respondents consider financial advice from social media, compared to 57% of Millennials, 38% of Gen X, and only 19% of Boomers.

Gen Z Starts Investing Early

Gen Z individuals are starting to invest earlier than other generations. On average, they start investing at 19 years old, compared to 25 for Millennials, 32 for Gen X, and 35 for Boomers. Starting to invest earlier gives investors more time to grow their wealth, as compounding interest can significantly increase returns over the long term.

Bottom Line

Investment strategies vary widely across generations, with younger generations showing a tendency to experiment with a variety of approaches. This highlights the impact of technology and social media on modern investing habits, particularly among younger generations. What are your thoughts on these generational investment strategies? Feel free to share this article with your friends and discuss. You can also sign up for the Daily Briefing, which is available every day at 6pm.