The bear market has brought “fear and uncertainty” for Gen-Z. How they are doing.

Ella Gupta made her first investment when she was 10 years old. With the help of her parents, she took half of the profits from her bracelet-making business and invested in the stock market. At 14, she opened a Roth IRA, having started her first job cleaning dental instruments. Now, at 17, Gupta faces his first bear market.

As the scum comes out of the stock market, it is also possible to buy stocks of quality companies on sale. “For young investors, a market correction or even a bear market can be good for your long-term nest egg, if you have the discipline to hang on and the courage to buy more when markets are down,” says Greg McBride, chief financial analyst at Bankrate.

US equities have not suffered a prolonged bear market since the financial crisis of 2008-2009. While the generation of investors who have come of age since then may not have the experience of their elders, today’s bear market inductees have advantages that previous generations could not imagine. Perhaps chief among them is unfettered access to information via the Internet and the ability to find and distribute it almost instantly. Not only has the proliferation of online brokerages and investment websites democratized investing; it has enabled new, mostly young, investors to build communities and share their knowledge in innovative ways.

Gupta invested the money she earned into making and selling Rainbow Loom bracelets.

Photograph by Kate Medley

More than half of Gen Z adults — those between the ages of 18 and 25 — are already investors, with 26% invested in individual stocks, according to a 2022 Investopedia survey on financial literacy. This would make them more financially active than any previous generation at their age, according to Investopedia. Gen Zers are also the first generation to be born into a world where social media use is the norm, meaning their investment thinking is heavily influenced by their peers.

“Peer-to-peer learning is very powerful,” says Gupta, who has also written a book for her peers on personal finance and investing.

Gen Z survey respondents say they learned about investing online, and just under half say they learned from YouTube or other videos. About a third credited TikTok for their newfound knowledge. For much of the past two years, following the investment advice of social media strategists has paid off. A 2006 to 2020 analysis of more than 30,000 stocks worldwide found that stocks with the most positive media sentiment outperformed those with the most negative sentiment, according to market sentiment aggregator MarketPsych.

A bear market, however, can highlight the dangers of groupthink, whether on Wall Street or in the digital world. It’s something Gen Zers are also learning as the crater of meme stocks, crypto crashes and other assets amplified by online investing influencers come crashing down to earth again. Many shares favored last year on online forums such as Reddit have since declined by double digits.

When she turned 14, Gupta used part of her earnings to buy a mother-of-pearl necklace.

Photograph by Kate Medley

“In a bull market, everyone looks like a genius because they’re like, ‘I’m making amazing returns in everything,'” says Vivian Tu, financial literacy content creator on TikTok. , by definition, we’ve hit a bear market. People who weren’t weighing the cons against the pros are going to feel them now, and it’s a scary time if you were overweight in risky asset classes.

Even conservative investors have suffered losses this year, with the

S&P500

down about 17%. Polls suggest that new investors have been much quicker to sell than their more experienced elders – quite the opposite, in many cases, of what they should be doing. A Bankrate survey found that 73% of Gen Z investors actively traded this year, compared to just 28% of Gen X investors, aged 42-57, and 25% of baby boomers.

Some experts fear that social media is a source of promoting bad investment behavior. “A lot of stuff on social media is great advice; it’s just that it’s not nuanced,” says Anne Lester, former retirement manager at

JP Morgan
.

“It has to be short and digestible, so some of the nuance gets lost.”

But concerns about Gen-Z’s risky business behavior might also be overblown. There’s reason to believe this generation will be more financially conservative than their predecessors, having seen parents lose their jobs during the financial crisis and the upheaval caused by the Covid pandemic, according to Wells Fargo Advisors.

Gupta says she’s not too freaked out by the prospect of a bear market because her investment strategy revolves around averaging or regularly investing a fixed amount. She also researches any company she buys stock in, studies financial statements, trading terms, and valuations.

“Whenever I buy a stock, I do so with the intention of holding it for the long term,” she says.

Many novice investors seem to have sharpened their pencils in recent months, notes Zoë Barry, CEO of social trading platform Zingeroo. Of all the clients who trade on Zingeroo’s platform, the activity of Gen Z investors most closely mirrors the recommendations of professional research firms, she says, noting that few are still buying into the stock meme hype.

Tu, the TikTok content creator, agrees. She has 1.5 million followers to @yourrichbff, her TikTok account, and says that with rising recession fears, her followers are uneasy, bombarding her with questions about the impact of the current macroeconomic environment on them.

“People talk about it like we’re about to move into our bunkers for three years,” she says.

This is not the case, she assures them.

Write to Sabrina Escobar at [email protected]

.

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