Gen Y and Z lead the charge on buying stocks, despite less diversifying

A young investor views charts on his computer screen and tablet in low-lit room

New data from Openmarkets’ XYZ of Australian equities report reveals that despite the pressures brought forth by inflation and the cost of living crisis, younger investors are bucking the trend towards selling their equities, unlike their older counterparts. 

Generation Y and Z are increasingly buying and holding equities to invest for the long term, while reducing their share trading frequency below that of the Baby Boomers cohort in 2023. 

In fact, Openmarkets’ analysis of 300,000 share trading accounts shows that 64% of Gen Y and Z’s trades in the first quarter of 2023 were buys, compared to a slightly lower 61% for Gen X, and 54% for the Baby Boomers. 

Younger investors look towards the future of resources

The data also shows that Gen Y and Z are largely focused on future-forward investments with the potential for growth – primarily in the form of exchange-traded funds (ETFs) and lithium stocks. 

In the first quarter of 2023, interest in ETFs from the younger generations grew from 27% to 29% of total trades. 

According to Openmarkets, Gen Y and Z’s most bought stock in Q1 2023 was in Australian  lithium mining company, Pilbara Minerals, followed by Stanmore Resources (coal mining) and Core Lithium Ltd. 

Lithium, often used in rechargeable batteries for a range of products like phones and electric vehicles, has good long-term growth prospects, according to Forbes Advisor

Long-term investments are what the younger generations are looking for right now

Gen Y and Z are trading less frequently than Gen X and the Baby Boomers, with the youngins conducting an annual average of 10.7 trades, Gen X at 16.3, and the Boomers shaking their portfolios up with 27.3 trades a year.  

Openmarkets chief executive, Dan Jowett says the data challenges the prevailing stereotypes of younger investors, who often follow the ‘hype’ and prefer higher risk investment strategies. 

“In an era where young people are often associated with 'hype' stocks, finfluencers and short-term wins, it is interesting to see this is not necessarily reality,” he said.

“Our data shows younger Australians are trading less, sticking to stocks they know and gradually accumulating them to build long-term wealth.” 

Diversification declines across the ages 

However, Openmarkets also noted that, on the whole, portfolio diversification is dropping – and it’s not a problem isolated to one generation, according to Jowett. 

“What also stands out for all generations, is that portfolios are becoming marginally less diverse, adding risk as market volatility continues. All investors should understand the impact of risk and volatility on portfolios as they consider short and long-term goals.”

So, with investors looking to buy and hold for the long term and reduce market volatility by embracing portfolio diversification, having a good share trading platform is crucial. That usually means low brokerage and account fees, reliable data, and access to a range of markets and equities, which can be an important step to reaching your investment goals. 

At Mozo, we compare online share trading accounts and give you the low-down on the costs and features on some of the best share trading platforms in Australia

Take a look at some of the featured platforms below to get started.

Share account comparisons on Mozo

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Last updated 13 July 2024Advertiser disclosure
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