Environmentally friendly investing is becoming a lot more popular these days. Back in December, CNBC reported that 33% of all investment assets are dedicated to ethical investment strategies.
It is fascinating to see the growth of sustainable and ethical investing. However, it is also important to determine which groups are driving sustainable investing the most.
Younger people are known for driving most of the sustainable living trends that we see. You can break things down further and see that millennials and Gen-Z citizens take different approaches to eco-friendly living. This means that they might follow ethical investing differently.
To this point, millennials have had more time to allocate toward investing because of the whole being on Earth longer than Gen Zers factor. And by nature, investing is a long game.
But Gen Z will surpass millennials in earnings in the next 10 years, according to Bank of America. Meaning the youngest generation will have more money to invest. But unlike hairstyles and jean fits, are Gen Zers better at investing than millennials? And are they more likely to focus on eco-friendly investing over traditional investment strategies?
There isn’t a lot of information on sustainable and ethical investing demographics, although we are seeing some important changes in ethical investing as the pandemic starts to end. However, you can make some great observations through other statistics on investing.
Paying off debt vs. investing
With millennials and Gen Zers dominating the share of student loan debt—and with college costs continuing to rise—the younger generations are in a bit of a financial pickle. Millennials have more student debt than any other generation, but Gen Z isn’t too far behind with borrowers ages 24 and under coming in at an average of $16,500, according to an October 2020 report from EducationData.org.
Having a ton of debt can prevent people from saving and investing, but that’s not to say that you can’t conquer all three at once.
Both generations can benefit from using a debt payoff calculator to determine how long it might take to pay down their debt—and how to create a budget that includes paying down debt, saving, and investing to balance out their financial portfolios.
Gen Z and millennials’ investing similarities
Much like the Greta Thunbergs and Malala Yousafzais—some of the most recognizable Gen Zers out there—Zillennials are more focused on environmental and social justice issues across different aspects of their lives, including investing. According to a Bloomberg survey of university students earlier this year, Gen Zers predicted that green and sustainable investing will be the biggest trend of the year around investments.
Millennials and Gen Zers aren’t all that different in terms of their priorities when investing. According to a Morgan Stanley report from 2017, 86% of millennials were interested in sustainable investing.
As the tech-savvy and tech-native generations, respectively, both millennials and Gen Z have been quick to embrace roboadvisors and other digital investment tools.
Both generations tend to be on the more conservative side, staying away from higher-risk investments. Millennials have leaned into simpler investments like exchange-traded funds (ETFs) and mutual funds over traditional stocks and bonds.
See, can’t we all just get along?
Can Gen Z out-invest millennials?
But a recent Credit Suisse report found that Gen Z’s ROI from stocks and bonds is going to be much lower than prior generations’ gains.
Baby boomers, Gen X, and millennials all have seen average real returns of at least 5% on equities and at least 3.6% on bonds. Adjusted for inflation, the report found that Gen Z is expected to see annual returns of just 2%, assuming a portfolio with a 70:30 stocks-to-bonds ratio.
So, through no (or little) fault of their own—you know, like how millennials took the brunt of Boomers and the microgeneration tanking the market—Gen Z, regardless of their investing skills, may not be able to edge out millennials in investing.
Is Gen Z More Likely to Embrace Ethical Investing?
Ethical investing is becoming a lot more popular these days. There is a good reason to believe that Gen Z will be more likely to embrace it than millennials, since they are more avid investors. However, it is possible that Gen Z is less sustainable with their investing strategies, so more data will need to be collected over time.
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