The stock market has witnessed significant fluctuations and uncertainties in recent years, largely influenced by the COVID-19 pandemic and the volatile nature of Big Tech stocks. This financial landscape has attracted a new generation of potential investors, mainly millennials (Generation Y) and Gen Z. As these young individuals enter the investing scene, it is essential to understand their perceptions and motivations.
How App-Based and Commission-Free Trading Have Changed the Game
One of the factors contributing to the increased interest of millennials and Gen Z in stock market investing is the rise of app-based and commission-free trading platforms. These technological advancements have revolutionized the investment landscape by making it more accessible and user-friendly. Terrance Odean, a finance professor at the University of California, Berkeley, highlights that these platforms now allow individuals to buy fractional shares, making investing possible even with limited funds. This increased accessibility has opened doors for young people to participate in investing and generate wealth over time.
The Influence of Pandemic Stimulus Checks on Young Investors
The COVID-19 pandemic brought about unexpected financial circumstances for many individuals. As governments distributed stimulus checks to citizens, it became apparent that some young people had additional disposable income to invest. According to Dan Egan, the director of behavioral finance and investing at Betterment, an automated investment adviser, there was a surge in deposits during the pandemic, primarily attributed to stimulus check recipients who had surplus funds available for investment. This influx of capital further fueled the interest of millennials and Gen Z in exploring investment opportunities.
Increasing Access: Fractional Shares and Lowering Investment Costs
The adoption of app-based and commission-free trading platforms has not only made investing more accessible but has also reduced investment costs. Traditionally, purchasing a minimum number of shares was a requirement, which proved challenging for individuals with limited funds. However, with the introduction of fractional shares, investors can now purchase less than one complete share, enabling them to diversify their portfolios with smaller investments. This change has significantly expanded investment possibilities for millennials and Gen Z, empowering them to enter the market with the resources they have.
Exploring the Mixed Results of Surveys on Millennial and Gen Z Interest in Investing
While there is a growing interest among millennials and Gen Z in stock market investing, surveys on their actual engagement with the market yield mixed results. A Federal Reserve survey from 2019 found that about half of Americans invest. However, capturing the precise impact of the younger generations’ interest in investing is challenging. As finance professor Terrance Odean explains, these survey results can be influenced by the market conditions experienced by young people. Changes in market returns may shape their perceptions and willingness to invest at any given time.
As millennials and Gen Z navigate the complexities of the stock market, their growing interest in investment opportunities is undeniable. Factors such as app-based and commission-free trading, pandemic stimulus checks, and the emergence of fractional shares continue to shape the investment landscape for these young individuals. While survey results on their actual investment engagement vary, it is crucial to recognize the transformative impact these generations can have on the market as they explore and participate in financial markets.
Analyst comment
Positive news: The growing interest of millennials and Gen Z in stock market investing, fueled by factors such as app-based trading, pandemic stimulus checks, and fractional shares, is making investing more accessible and empowering young individuals to generate wealth over time.
Market prediction: With the increased accessibility and resources available to millennials and Gen Z, their growing interest in investing is likely to drive market activity and potentially lead to increased investment and participation in financial markets.
