A Change in Thought
Nobody wants to hear they’re just like their parents. But when it comes to investing, new data show that younger generations are mirroring their parents.
After a volatile few years, historically high inflation, a stock market near record highs, and high interest rates under our belt, younger generations are rethinking how to put their hard-earned cash to work.
Becoming Their Parents
Millennial and Gen Z investors have historically prioritized strategies like ESG, which stands for environmental, social and governance, and describes companies or investments adhering to certain markers in each category. More volatile alternative assets like cryptocurrency are also disproportionately favored by younger investors.
But following the turmoil of recent years, and faced with risk factors like geopolitical tensions and a presidential election, younger investors are beginning to explore investment strategies more common for baby boomers, according to a survey conducted by Stanford University, the Hoover Institution, and the Rock Center for Corporate Governance.
As ESG faces political scrutiny, fewer young investors are basing investment decisions on these issues, unwilling to miss out on gains in other sectors.
“Young investors tell us that they are much less willing to lose personal money to see progress made against issues such as climate change, sustainability, labor conditions, and diversity in the workplace,” said Professor Amit Seru of Stanford Graduate School of Business and the Hoover Institution Working Group on Corporate Governance. “With their confidence down, investors are more cautious about risking their personal wealth to support stakeholder issues.”
The share of young investors expressing particular concern about social issues dropped to 53% in 2023 from 65% in the prior year, while the share of those concerned about corporate governance issues fell to 47% from 64%.
As inflation remains elevated and general economic sentiment among younger generations declined last year as well, which may be leading these investors to prioritize consistent returns.
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