Younger Investor Confidence Reaches Pandemic High

Younger Investor Confidence Reaches Pandemic High

Gen Z and millennial investors are optimistic about taking on more risk in their portfolios
A stock trading app

Over a year into the coronavirus pandemic, younger investors are beginning to feel more confident in their stock market decisions — and may be gearing up to take on more risk.

According to a new survey from ETRADE, nearly three out of four (72%) millennial and Gen Z investors (ages 18 to 34) said they’re confident in their portfolio decisions, a big jump from 56% of younger investors who felt this way around the same time in 2020.

The end of the pandemic may be inspiring hope for young investors

Perhaps all the extra time at home helped some investors to learn better investing strategies. At this time last year, just 56% of investors ages 18-34 felt confident in their portfolio decisions. Not only has that percentage now jumped to 72%, but young investors also appear to be more confident than the general population. Of all investors surveyed, just 57% felt confident in their decisions.

The pandemic introduced a lot of uncertainty to the stock market and economy in general. As both begin to level out, it’s not too surprising to see young investors — perhaps some of whom are more novice investors — begin to feel a bit more empowered, or at least more informed, about their investing moves.

Indeed, a recent Schwab survey noted that 15% of its respondents had only begun investing in 2020 — and two-thirds of that group, dubbed "Generation Investor," were considered millennials or Gen Zers. The E*TRADE survey’s results suggest that even just a year of experience gained can make a world of difference for young fledgling investors working towards their financial goals.

With less uncertainty, young investors report increasing risk tolerance

Additionally, younger investors report a larger appetite for risk in their investments these days. Within the last three months of the pandemic, 70% of millennial and Gen Z investors have reported an increase in their risk tolerance, a significant boost from the 51% of young investors ready to risk more last year.

While market indicators may be encouraging this growth in risk tolerance, it’s also possible that individual investor confidence is leading to riskier moves. An experienced investor who knows how to maneuver in the market may logically be willing to place bigger bets — however, only 47% of investors overall are feeling as risky as Gen Z and millennial investors.

Young investors more likely to use smart phones to invest

Perhaps another aspect helping young investors get into and stay active in the stock market has been the explosion of investing apps. Retail investing apps like Robinhood have increased in popularity, perhaps inspiring more investors to join easy-to-use platforms.

The percentage of younger investors who use a trading app at least once a week went up 14 percentage points from the second quarter of 2020 to this year. More than 3 in 4 investors ages 18-34 have now reported using a trading app at least once a week, with 20% reporting using these apps every day.

The 76% of young investors who use trading apps at least once a week also trumps the 49% of all investors who use apps this frequently. The survey also found that 59% of young investors were more likely to rely on a mobile app for stock trades in the pandemic’s last three months, versus just 39% of investors overall in that time.

Younger investors may also have a more modern sensibility regarding not just how they trade, but what they trade: A previous survey from online magazine Sophisticated Investor showed that 12% of millennials considered cryptocurrency to be the safest investment for 2021, versus just 9% of respondents overall.

And though it will take many more millennial and Gen Z investors buying stocks to overtake the shares owned by older generations, the young investors are evidently making a start.

Methodology: ETRADE conducted this survey from April 1 to April 12, 2021, with an online U.S. sample of 957 self-directed active investors who manage at least $10,000 in an online brokerage account. The survey has a margin of error of ±3.20% at the 95% confidence level, and was fielded and administered by Dynata.*