Young investors see the stock market as a form of income. That could get risky
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Young people who are anxious about their jobs in an AI future are hedging that by investing in the stock market, according to a study by the Oliver Wyman Forum of 300,000 investors since 2020.
Why it matters: Young investors often favor vibes and momentum over fundamentals — so they could get burned if this bull market stumbles.
What they're saying: Many younger investors "don't believe traditional milestones will bring security," such as buying a home or staying at a job for a long time, Ana Kreacic, chief operating officer of the Oliver Wyman Forum, tells Axios.
- Gen Z's desire for independence has led to a boom in investing among the young cohort.
- They have a sense of urgency over having more money right now, potentially leaving novice traders with a false impression of what their returns should look like.
Between the lines: Those attitudes are being driven by the collision of several things, according to the authors of the study.
- Fears about job security amid a shaky economy with a widening wealth gap.
- A boom in social media fueling a desire for wealth.
- The rise of AI clouding the picture of the future.
- And the pandemic, which showed young people how everything they expected to happen, like graduations or school dances, can change in an instant.
By the numbers: 55% of those studied cite social media as the top reason they get into investing, more than four times that of baby boomers.
- The share of people feeling financial pressure has nearly doubled since 2022.
Threat level: This group of investors has yet to see a nasty market downturn, and the "buy-the-dip" mentality has so far worked out well for them.
- Experts tell Axios that investors don't appreciate the risks that such a mentality could have for the entire stock market.
- The second that dip buying looks as if it didn't work out, this group could pull their money out of the stock market, making a minimal downturn far worse, considering that retail trading accounts for a quarter of daily volume now.
- "That's the biggest risk," Christian Edelmann, managing partner for Oliver Wyman, tells Axios.
Zoom out: AI is acting as an "emotional buddy" for Gen Z investors, supporting them in their trading journeys, Edelmann says.
- While AI-powered investing advice could democratize exclusive and expensive financial advice, it can also take the personal out of personal finance.
- Without an advisor, young investors may not have a portfolio that's positioned for their risk tolerance or time horizon.
Thought bubble: Investing for your future is a good thing!
- But getting all your advice on investing from AI or influencers is not.
