Crypto, hedges, and day trading — how millennials and Gen Zers are putting their money to work during COVID

Data from 130 young investors shows many are doubling down

For Gen Z and young millennial investors, the past few months have been a whole new world. Most were teens or pre-teens during the last recession, and are now facing volatility that’s challenging even for professional investors. The Dow Jones had its largest single-day drop in history in mid-March, and both the Dow and the S&P 500 had their worst first-quarter performances ever. Last week, the S&P had its largest weekly gain since 1974, but there’s significant skepticism about whether this recovery will continue.

We were curious about how many millennials and Gen Zers were investing before the coronavirus hit, whether they’ve made any changes to their portfolios, and how the crisis has impacted their outlook on the markets. We surveyed 130 Accelerated readers (college students & recent grads) — 65% were Gen Z’ers, and 35% were millennials — about their experience over the past few weeks.

“The first day my portfolio fell 7% in one day (mid February), I was so anxious I couldn’t sleep. I’ve continued to hold everything (all long term investments), read Medium articles on personal finance and spent less time checking my Robinhood.”

-Gen Z investor

We’ll summarize some of the key takeaways first, with full data & more details below!

• Nearly 75% had made investments pre-corona, though the majority were trading infrequently. They mostly invested in mutual funds/ETFs and individual stocks, with Robinhood as the favorite platform — though ~30% of them were also Coinbase users.
• The majority (53%) have invested more as a result of the coronavirus, as they see opportunities to build up ownership at relatively low prices and take advantage of volatility in individual stocks.
• Millennials and Gen Zers differ in investment behaviors. Gen Zers are much more active traders, especially during coronavirus, and tend to rely heavily on mobile platforms like Robinhood. However, millennials are putting more money to work, and are using more traditional brokerages.
• The level of anxiety is mixed. There was an almost even split between respondents feeling neutral, anxious and optimistic about their portfolios! Many investors expressed surprise that the market could turn so quickly, while others are focused on the opportunity for outsized gains.
• They’re checking the markets frequently (most are watching daily), and 82% believe stocks haven’t hit the bottom. Several respondents mentioned seeing COVID an opportunity to try new things, such as options trading.
• Gen Zers are leaning in heavily on alternative assets, as they feel crypto, VC/PE, and real estate will have the best performance over the next year. Millennials had higher ownership of these assets pre-corona, but are more optimistic about equities and fixed income going forward.

What did investing behavior look like pre-corona?

As a baseline, we wanted to get a sense of what investment activity looked like before the coronavirus hit. 74% of our respondents had made personal investments, and of this group, 63% invested an amount that they considered “significant” relative to their overall net worth.

Millennials were more likely to be investors (84%) than Gen Z’ers (67%), though the latter group more often reported investing a significant portion of their net worth (67% vs. 54% for millennials). Neither result is surprising, as most Gen Zers are still in high school/college— they have less income to invest, and any given investment is a larger percentage of their net worth.

Mutual funds/ETFs were the top investment (owned by 75% of investors), followed by individual stocks (72%) and crypto (28%). Gen Zers were slightly more likely to own individual stocks instead of mutual funds/ETFs, while millennials were 2x more likely to own real estate, VC, or PE.

Responses were mixed in terms of investing frequency pre-COVID— overall, the plurality (24%) of respondents had a “set it and forget it strategy,” with another 12% trading annually or only when a roboadvisor rebalanced them. However, 22% of respondents invested on at least a weekly basis, with 6% making daily trades.

There was a significant generational difference here, with Gen Zers reporting much higher trading frequency. Only 15% of Gen Zers traded annually or less frequently, with almost half of respondents trading monthly or weekly.

What’s causing this? One theory is that since most Gen Zers don’t yet have an independent job, they see investing as a “side hustle” to make some extra spending money, and are therefore more active, and more likely to sell to lock in gains. Millennials may invest larger amounts, but are looking for consistent returns as they start to think about eventually retiring — and are less likely to pull money out of the markets for expenses.

In terms of investment platforms, Robinhood was the most popular, but Gen Z investors were much more likely to use it than millennials (68% vs. 28%). Millennials tended to use more traditional brokerages like Vanguard (30% vs. 12% of Gen Zers) and Fidelity (30% vs. 18% of Gen Zers). Many millennials wrote in Charles Schwab as their platform of choice, which no Gen Zers mentioned. This could be because Gen Zers are particularly fee-sensitive, and spend most of their web time on mobile — so want to invest on mobile as well!

Has their investment strategy changed?

We then dove into whether or not the coronavirus has impacted investment strategies. When asked how their portfolio changed, the majority of investors (53%) said they have invested more over the past few weeks. Only 11% reported selling some or all of their portfolio.

Millennials are slightly more likely to be investing more (61% vs. 52% of Gen Zers), and have also been selling less (5% versus 16% of Gen Zers).

We asked respondents to write about why they changed their investment strategy, if they did so. Those who reported investing more (53%) said they felt that it was a good time to buy in at relatively low prices, and saw opportunity to make money on more speculative bets in individual stocks.

“The returns to be made longterm from this downturn on a macro basis make it a great time for investors who have 10+ years before they need their money, much like happened in 2008.”

“It has been a while since I’ve invested any money, mostly because with the market at all-time highs, it was difficult to estimate positive growth. Now that the securities are at a bargain, I’m more inclined towards investing my money.”

“I think this a great time to learn how to better actively manage my personal investments as opposed to buying more into ETFs and other indexes.”

Those who haven’t changed their strategy (33%) were a bit more cautious about “buying the dip.” They worried about having enough cash on hand, and wanted to see the markets stabilize before making more investments.

“Not looking to invest, stock market is too volatile.”

“I’m waiting for the markets to return to normal. I invest particularly in leaders and I’m worried important executives will get the virus. I’d rather miss out on the potential gains from buying now (relatively cheap) than risk investing in a company where the leader resigns.”

How do they feel about their investments?

We also asked respondents about how they feel about their investment portfolio as a result of the coronavirus. Responses were split nearly evenly — 35% were either somewhat or very optimistic, 34% were neutral, and 31% were somewhat or very pessimistic. There was no significant difference in investment outlook between millennials and Gen Zers.

Many respondents noted that this was their first time investing in a downturn, and were surprised by how quickly the markets could turn. Though some were excited to buy more, others expressed anxiety around the sudden drop.

“I realized it’s actually possible to lose non-trivial amounts of money on the market, even without making stupid bets.”

-Gen Z investor

Where do they think the markets are headed?

As a bonus, we asked some questions about their outlook on the financial markets more broadly. First, we asked all respondents (even those who hadn’t made any investments) how frequently they were checking in on the markets.

They’re keeping a close eye on how things are progressing — 65% reported checking the markets at least once a day, and an additional 30% reported checking weekly. There was no significant generational difference here.

We also asked more speculative questions about what they expect to see over the next year. The plurality (34%) believe equities will be the best performing asset class, but 82% think the stock market has not hit the bottom.

“The panic around the coronavirus was completely unanticipated and my first lesson in how much a portfolio can change overnight. It has definitely served as a good reminder of the importance of being risk averse when necessary, and encourages me to consider investing in other diverse asset classes.”

-Gen Z investor

Millennials feel that equities or fixed income will be the best performers over the next year (60% vs. 41% of Gen Zers), while Gen Zers are putting their money on alternative assets like crypto, PE/VC, and real estate (38% versus 12% of millennials). We weren’t surprised to see crypto rank somewhat highly here — Bitcoin and other cryptocurrencies should theoretically perform better as a store of value when central banks are printing money.

Thanks for reading! Would love to hear your thoughts & feedback — feel free to email us at twins@crv.com or tweet us @venturetwins.

If you’re working on a new company in consumer fintech aimed at millennials or Gen Zers, please send us an email — we’d love to hear about it!

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