Progressive Pockets: a podcast about the untapped power of our wallets to build the world we want
A podcast at the intersection of social impact and personal finance that covers questions of how we might spend, donate, and invest more in line with our values.
Hosted by Genet "GG" Gimja
Formerly known as the Spend Donate Invest Podcast
Progressive Pockets: a podcast about the untapped power of our wallets to build the world we want
155. How Gen Z thinks about Investing
This week let’s chat about Gen Z and how they tend to invest. As digital natives, Gen Z investors tend to be more comfortable with various investing platforms and apps. As investors who have been exposed to more information about the world, Gen Z investors consider their environmental societal values when they decide whether or not to invest in a company.
But just how far are Gen Z investors willing to go to live out their values? Tune in this week to find out. The answer may surprise you!
Links from today’s episode:
‘Not just money and math’: Young people are willing to sacrifice returns for ESG | MSNBC Aug 2023
Generational Investment Trends And Automation In Modern Trading | Forbes March 2024
Wall Street Zen Gen Z Money Social Media Survey
https://www.wallstreetzen.com/blog/genz-money-social-media-survey/
ICYMI another episode you might enjoy:
Episode#70 The legal right to invest according to our values (recorded before the 2024 rebranding of this show)
Connect With Genet “GG” Gimja:
Website https://www.progressivepockets.com
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Welcome to Progressive Pockets! I go by GG, that’s short for Genet Gimja. This is a show about our money, but not in the typical way that we talk about it. Usually when we talk about money we are talking about how to make more save more invest more, but this show is about a different aspect of our money, it’s about taking back some of the power of our money so that we can shape our society.
So on this show you’ll hear episodes about shopping with companies that better match your values, thinking about banks that are aligned with your values, and we talk about investing in line with our values too.
Today’s episode is about Gen Z and how this generation thinks about investing compared to other generations.
The research I’m going to be quoting today comes from US Bank, and I will go ahead and link that in this episode’s description so you can read it if you want. I’m also going to be referring to some insights from Forbes as well, so that will also be linked for you.
There are so many things we could say about Gen Z and how they think about investing.
They are often called digital natives because they have grown up with the internet and so they are comfortable with investing apps and platforms. Being younger and exposed to so much information, they tend to be interested in exploring diverse investments, and so that’s why we see that so many Gen Z investors, although the stock market is where they primarily invest, a sizable percentage of them are investing in crypto as well.
And the environmental and social impact of their investments is a central consideration for them. This is another defining characteristic of Gen Z investors.
What the data show is that almost two-thirds of Gen Z investors want to allocate their portfolios in a way that supports causes they care about.
That’s compared with 59% of millennials, 45% of Gen X and 30% of boomers.
And in some ways that makes sense. Gen Z is known to be more vocal about their societal values and they frankly also have a longer time horizon before they think about retiring, so they truly do have more time to gather their nest eggs.
But it also reflects a way of thinking about investing that is becoming more mainstream. And that is the idea that we can chase more than just financial returns. We can want more than that and we can achieve more than that with our investment accounts.
We can reflect our values in our investment accounts. We can create our nest eggs avoiding companies that are out here creating a world we don’t want. We don’t have to sacrifice our values and look the other way to build our retirement investments. That’s pretty new. Of course, there were always some investors that were being selective but for the mainstream, this was not really a mainstream idea at all. And it’s exciting that there’s so much of a growing appetite and demand for this type of investing moving into the future.
In this article, in addition to the data covering thousands of investors, they also include interviews of a few Gen Z investors and they talk about making the switch to clean energy ETFs, one of the Gen Z investors talked about taking his money out of the Home Depot stock after they gave donations to federal lawmakers who objected to the 2020 presidential election results.
Maybe that’s not surprising to you, that Gen Z wants to invest in companies that match their values. Does it surprise you that a lot of these investors are willing to trade some financial returns in exchange for being able to invest in companies with their values?
Here’s what the data says:
Among Gen Z investors, 85% of them are willing to underperform the S&P 500’s 10 year average return. Pretty similar numbers for millennials. And you know, even for Gen X and Boomers they would also be ok with underperforming the market. 73% of Gen X would be ok with that and 65% of Boomers would too.
In this study they actually went one step farther and asked just how low those returns could be. This was fascinating to me.
So, for Gen Z:
Only 15% said they Would not accept a less-than-average return. Compare that to over a third of boomers.
19% said they Would accept a 9–11.8% return. 23% of Boomers said they would.
29% said they Would accept a 6–8.9% return.21% of Boomers said they would.
30% said they Would accept a 3–5.9% return. That number was half as big for boomers so we can see we’re starting to lose them here LOL.
7% said they Would accept less than 2.9% return. And that number was 6% for Boomers.
So this is where we start to see just how far Gen Z investors will go in terms of walking the talk to do some values aligned investing.
One of the investors they had interviewed, the same guy that took his money out of Home Depot talked about one of his investments into an ETF focused on utility companies that help conserve and purify water. The S&P 500 gained about 15% while his clean water ETF gained 9.5% over that same time period. So definitely a lot lower, but my goodness, 9.5% is still a great return. And I think that’s what we have to keep in mind here during this discussion. When we talk about switching over to investments that actually align better with your values, it doesn’t mean you’re never going to be able to retire.
Socially responsible investing isn’t nearly as radical as it might sound. Often it’s just taking out some of the biggest offenders. We’re still operating within capitalism guys, as a beginning step, we’re just talking about choosing investments that are slightly less bad.
And yet, even that tiny change has power. You know how we know? Republican lawmakers are fighting against it. President Biden used his first veto on this very issue.
There are so many negative things we can say about social media, but one great thing about it is that it has facilitated more conversations and more learning about investing among young people. According to wall street zen dot com, 76% of Gen Z learn about personal finance from Tiktok and youtube. And you know, that can introduce some risk, 83% said that they had encountered misleading information about personal finance on social media. So that’s the very real risk. Most of the content on social media doesn’t have the proper context to be helpful, or is just plain inaccurate. So that’s a risk. As is the FOMO that social media causes. FOMO stands for “Fear of Missing Out.” More than half of the Gen Z respondents said that social media can cause peer pressure and FOMO and I think we can all agree that positive peer pressure can be helpful, doing something just because it seems like everyone else is doing it, can be a recipe for disaster. I think I had a relatively drama free decade in my 20s because I am such a slow decision maker LOL. Did I miss out on some fun stuff, absolutely, but I also avoided a lot of mess by being too slow to catch up to my funner and more spontaneous peers.
Despite the risks of misleading information and FOMO induced decision making, I do think social media is going to be a helpful driver in increasing the visibility of and therefore the demand for values aligned investments. And I think that’s a good thing. More demand creates more supply. And that increased supply can bring more investors into this type of investing.
So to recap, here’s what we covered today:
Gen Z invests a little differently than the rest of investors. They are more digitally savvy, more risk tolerant, and more interested in diverse investments.
Being able to invest aligned with their societal values is very important to Gen Z investors.
They are willing to sacrifice returns, a lot of returns to be able to invest in companies that match their values.
If you have more time today, here’s another episode to check out, that’s episode 70. I mentioned earlier that President Biden used his first veto to protect some rights relating to impact investing. Episode 70 is called “The legal right to invest according to our values” and it is about the legal challenge that was going on at that time. Like all episodes here, the episode is short and sweet and avoids a lot of complicated language and terminology. One thing about that episode is that it was recorded before this show was rebranded to the Progressive Pockets podcast. I hope you enjoy it.
Speaking of enjoying it LOL, if you are enjoying Progressive Pockets please click on 5 stars on your podcast player app. Podcasts are different than other types of media, with youtube for example, you can see how many views there are, how many likes, but with podcasting it’s just not like that. This show gets plenty of downloads, but a new listener wouldn’t necessarily know that. One way you can encourage others to take a chance and download an episode is by leaving a 5 star review. Thank you for doing that. I appreciate it.
Let’s end with a quote…
“Let future generations say we were the ones who stood up. Let them say we were the first to live in a world where all girls can learn and lead without fear.”
That quote comes to us from none other than the inimitable Malala Yousafzai
Let’s talk again soon!