Stop the presses! Generation Z are tuning out to be prudent, thoughtful, and mature with their money! New research from the World Economic Forum shows that 30% of Gen Z invest in stock markets by university age, dwarfing the 15% of millennials and the 5% of baby boomers who did so. With housebuying expensive and many Gen Zers cutting costs by living with mum and dad, these youngsters are sensibly choosing to build wealth through buying the shares in listed companies, perhaps earning a healthy passive income in the process.
At least, some of them probably are. But if we dig into the weeds of these young investors’ habits, a somewhat different story emerges.
Zig zagging
A substantial part of the investing activity of the latest batch of young adults revolves not so much around tried and tested techniques, but around high-risk, high-reward stocks instead. Think speculative bitcoin-adjacent companies or penny stocks that zig-zag daily in double-digit percentage terms.
This is a world of memestocks, finfluencers, chasing lambos, and YOLOing your way to a 100-bagger. If you’re unfamiliar with those terms then, frankly, I’m jealous of you. It’s a vibrant, new subculture, armed with its own bizarre lingo, commandeering the stock market with the ultimate goal of getting rich quick.
The worst part of these imprudent choices is that investing young is something like a cheat code. Making big money through stocks is easier when there’s a lot of time to let that compound interest rip.
Start putting money away at 18 and you’re miles ahead of those of us who got a handle on their finances in their 30s and 40s. A typical investing timeline lasts around 25-30 years, implying a possible retirement date of 43-48 for those dipping their toes in the water by university.
While many that young do not have the income or inclination to invest for the future, those that do are at a serious advantage if they take the right steps.
Sense and sensibility
What might those steps look like? It might have something to do with boring but sensible companies. One stock I doubt is on anyone’s ‘YOLO radar’ is British American Tobacco (LSE: BATS). It’s worth pointing out that ESG investors may want to steer clear, too, given profits come from selling millions of cigarettes.
The £91bn market cap cigarette giant is not going to 100-bag (go up 100 times in value) anytime soon, but that doesn’t make it a bad investment.
The FTSE 100 firm’s weighty dividend, currently a 5.74% yield over a year, is well-covered by consistent earnings. And while cigarette consumption has been falling, non-combustibles like vapes and pouches may sustain sales well into the future.
BAT’s reduced risk (non-cigarettes) division is thriving with lines like Velo (nicotine pouches you put on your gums) or Vuse (a type of vape or vapour product that contains nicotine but no tobacco) now making up 15% of all revenues. Compare that to fellow FTSE 100 competitor Imperial that has only 3% of sales from reduced risk products. For anyone of any age seeking sensible yet unexciting stocks, this might be one to consider.
