In the 1980s, certificates of deposit returned double-digit annualized returns. Today, young investors are losing money. Inflation is at 8.3%, meaning actual returns are negative. Even the stock market, which is supposed to offer long-term growth potential, is projected to offer dismal returns for Gen Z investors.
With returns like these, it’s no wonder that Gen Z is looking for alternatives. They’re more likely to invest in decentralized finance offerings and less likely to trust traditional offerings. This thirst for alternatives extends to other areas of life as well. Gen Z is interested in fine wine, whisky, and art. They’re also driving the market for fashion items like sneakers and handbags.
Gen Z is thinking about their future and how to make the most of their money. They understand that traditional investment vehicles aren’t going to cut it in today’s environment. And they’re willing to take risks to get better returns.
Decentralized Finance
In 2008, the global financial system nearly collapsed. In the aftermath of the crisis, a new movement emerged: decentralized finance or DeFi. DeFi is built on the idea that financial systems should be open, transparent, and accessible to everyone. It’s a radical departure from the centralized model that has dominated finance for centuries.
DeFi is still in its early days, but it’s already attracting much interest from Gen Z investors. One study by Capitalize found that 56% of Gen Z adults are interested in investing in cryptocurrency or NFTs as part of their retirement strategy. That’s compared to 54% of millennials, 20% of Gen X, and just 14% of baby boomers.
An Engine Insights study similarly found that 59% of Gen Z and 46% of millennials believe they can become millionaires by investing in cryptocurrencies. This is a sign that young people are taking DeFi seriously as an investment opportunity.
Venture Capital
The average Venture Capital Trust investor is 56 years old, according to data from the UK’s Venture Capital Trust Association. VC is not an industry that’s known for attracting young investors.
But that’s starting to change, partly due to the SEC’s new rules on accredited investors. The rule changes, which went into effect last year, allow more individuals to participate in private offerings. This has opened up the VC market to a new generation of investors.
One group that’s been quick to take advantage of the new rules is Gen Z VCs. Gen Z VCs is an online community where young investors swap knowledge and deal flow. The group has grown to over 14,000 members since launching in November 2020.
Gen Z VCs like Paige Finn-Doherty, for instance, launched Behind Genius Ventures to invest in growth companies led by underrepresented entrepreneurs. Similarly, angel investor Ryan Li launched an AngelList syndicate, Deep Ventures, to bring new technologies to life.
Meanwhile, Jonathan Chang founded syndicate DayDream Ventures, with previous angel investments including Copy.AI, an AI startup reaching hundreds of thousands of users within a year of its launch.
The Bottom Line
Gen Z is a generation of risk-takers. They’re unafraid to challenge the status quo and always looking for new and innovative ways to invest their money. This quest has led many young people to explore alternative investments, which can offer a more diverse and often higher-yielding portfolio than traditional stocks and bonds.
But until recently, alternative investments were only available to wealthy individuals and institutions who could afford the high minimums and fees associated with these types of investments. Thanks to Gridline, that’s no longer the case.
Gridline is a digital wealth platform that provides a curated selection of professionally managed alternative investment funds and enables access for individual investors and their advisors to gain diversified exposure to non-public assets with lower capital minimums, lower fees, and greater liquidity.
This means that Gen Z investors can now access the same types of investments as the super wealthy, but without having to fork over huge sums of money or paying exorbitant fees.