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Portfolio > Portfolio Construction

Millennial, Gen Z Risk Tolerance Soared Since Pandemic Started: E-Trade

By Jeff Berman

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The risk tolerance of younger investors has grown significantly since the start of the COVID-19 pandemic, according to the findings of the latest E-Trade Financial StreetWise quarterly tracking survey of experienced investors.

Fifty-one percent of Generation Z and millennial investors surveyed said their risk tolerance increased since the coronavirus outbreak, 23 percentage points higher than the total population, E-Trade said Wednesday.

Younger investors are “taking cash off the sidelines,” trading more often and optimistic of a quick economic recovery, E-Trade said.

Thirty-four percent of those surveyed under the age of 34 said they were moving out of cash and into new positions, 15 percentage points higher than the total population.

Meanwhile, 51% of those in the same age group said they were trading equities and 46% said they were trading derivatives more frequently since the pandemic, compared to 30% and 22% of the total population, respectively.

And  although only 9% of young investors said their investment portfolios had recovered since the start of the pandemic, 50% said they thought it would happen in the next six months, compared to 33% of the total population.

Among the third-quarter survey’s other findings, personal health (58%, the same as in the Q2 survey) and personal investment portfolios (53%, up from 49%) remained the biggest worries for young investors as a result of the pandemic, E-Trade said.

Other top concerns among those under 34, according to the survey, were their jobs and potential job prospects (42%, up from 27%); the effect on the U.S. and global economies (37%, up from 16%); their ability to afford day-to-day living expenses (34%, up from 33%); and their personal vacation and leisure plans (28%, up from 15%).

Although time is on the side of Gen Z and millennial investors, that “doesn’t mean they can be complacent or act emotionally,” Chris Larkin, managing director of trading and investment product at E-Trade Financial, cautioned.

“Access to the market has never been easier, so investors just embarking on trading should walk before they run,” he suggested, adding: “A thoughtful and disciplined approach is key — do your research, set up watch lists, and align your trading strategy with your goals and risk tolerance.”

Larkin provided three more key tips to young investors getting started with trading: Do your homework and don’t get caught up in stock fads; learn the full spectrum of options trading; and test drive trading ideas without committing actual capital, then monitor a paper trading portfolio and modify it to analyze new scenarios after executing a trade.

— Check out Fidelity’s Assets Hit $3.3T on Trading Surge on ThinkAdvisor.

Jeff Berman

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